RES investors, especially from the solar energy field, but also wind energy, are engaging in talks with electricity supply companies and industrial enterprises to establish power purchase agreements (PPAs) for their future or under-construction projects as they anticipate a reduction in capacities at forthcoming RES auctions and even lower tariff prices than the low levels registered at the most recent auction.
This increased focus on PPAs highlights the major shift taking place in green-energy production as fixed tariffs, at auction, are gradually being phased out and the energy-exchange era is taking over.
RES producers need to establish contracts for the sale of their output in order to develop their projects as banks are not willing to finance such investments if potential earnings, at sufficient levels, have not been secured in advance.
No bilateral PPAs have yet been established, but the negotiations are continual and tenacious.
Potential RES producers have – since the previous RES auction – been willing to accept lower prices, proposing levels of as low as 40 euros per MWh attached with demands for shorter contracts, including five-year periods, sources have informed.
Market officials expect PPAs to start emerging over the next six months, noting that banks will play a decisive role in the price levels to be established as their project financing decisions will depend on profit margins presented by investors.