Corporate PPAs in the light of the Corona crisis
How will the Corona crisis affect Corporate PPAs?
Not only as a trade instrument for post-EEG plants (producing renewable energy not covered by the statutory feed-in tariffs pursuant to the German Renewable Energy Sources Act), but also as a financing model for new plants, the majority of energy market players consider Corporate Power Purchase Agreements (Corporate PPA) to be a (very) important factor in the German energy market of the future. Offtakers share this view. With regard to the Corona crisis, the question arises whether its effects will have a lasting impact on the economic attractiveness of Corporate PPA in the German electricity market.
Corporate PPA is a long-term electricity supply contract of renewable energy to be concluded between the generating company and a company (the ‘corporate’) as an offtaker. The latter is often an industrial buyer with high power consumption. Due to the expiry of the statutory feed-in tariffs for old plants from 2021 on as well as with regards to the central targets of the energy transition being (1.) 65 percent of renewable energy in the German electricity market till 2030 and (2.) CO2-neutrality in the EU till 2050, Corporate PPAs have an important contribution to make and enable additional investments for the energy transition.
Compared to other EU-member states, Corporate PPAs in Germany are still at an early stage. However, there is considerable evidence that the number of Corporate PPAs concluded will be increasing, in particular in the wind energy sector. Both, generator and offtaker, aim to protect themselves against price fluctuation in the long run by concluding a Corporate PPA.
Impacts of the Corona crisis on Corporate PPA
The question arises whether such hedging will be possible in the near future due to the Corona pandemic respectively its effects. In other words: What does the crisis and the associated uncertainty in the energy sector mean for the development of Corporate PPAs in Germany?
Read the full article here.