Financing and investment trends 2020

The corporate sourcing of renewable electricity via Power Purchase Agreements (PPAs) has been growing steadily since 2015. Corporates have a variety of different motives to source power from renewables, but the possibility to lower and fix electricity costs is a major part of the rationale for these deals. A recent survey of 1,200 companies across six countries showed that, of those sourcing renewables, 92% of them are doing so to reduce energy costs. Despite the challenging conditions, 2020 was another record for contracted volumes of renewable electricity via corporate PPAs in Europe, with almost 4 GW in wind, solar and other renewable projects. It was also a record for the number of deals finalised in a year with 51 in total, including 24 signed for wind energy (of which 6 were for offshore wind) and 24 for solar.

Until 2018, wind accounted for 90% of the contracted capacity in Europe but the last couple of years has seen a rapid expansion in solar PPAs which has really helped drive the market growth. In 2020, wind accounted for just over half of the contracted capacity, and cumulatively, wind makes up 74% of the contracted capacity in Europe. Wind energy is very well placed to accommodate corporates’ needs for renewable electricity due to its modular scale, cost-competitiveness and low risk profile.

Corporate renewable PPAs also come with certain benefits for generators. Price visibility over a long period of time and a guaranteed off-taker are important to lower the cost of debt financing.

Recent years have seen the development of offshore wind PPAs from the first in 2018 for a proportion of the capacity of Kriegers Flak in Denmark, to at least nine offshore wind farms signing corporate PPAs to date in Denmark, the Netherlands, Belgium, Germany and the UK.Over 700 MW of offshore capacity was contracted in 2020, almost 20% of the total.

Typically, the Nordic region, followed by the UK and the Netherlands, were the biggest markets for these deals.However in 2020, Spain, Germany and Belgium signed significant volumes of PPAs. Spain in particular contracted more than 1.3 GW with over 1 GW of solar PPAs.

PPAs are being signed by more companies, across more sectors and more countries and will play an increasingly important role in meeting corporate demand for renewable electricity as well as supporting the finance and build-out of renewable energy in Europe.

Demand for renewable electricity comes from a wide variety of industrial sectors and recent years have seen a diversification in off-takers signing PPAs. Heavy industry and ICT have contracted the majority of corporate renewable PPAs in Europe. In 2020 Amazon announced seven new PPAs totalling

850 MW for wind and solar across six countries (France,Germany, Ireland, Italy, Sweden, and the UK). This means they have now contracted more PPA capacity in Europe than any other corporate.

The chemicals industry has started to fully engage the renewables sector and are looking for renewable projects to partner with. Decarbonising energy intensive industries is key to decarbonising the European economy and it is great to see the progress being made. In 2020, just under 500 MW of renewable energy was contracted by chemicals companies alone, a major achievement considering the first chemicals PPA was only signed in 2019.

A number of other sectors saw significant volumes of contracted PPA capacity in 2020. The pharmaceuticals sector, including Bayer and Novartis, signed over 900 MW and the telecommunications sector, including Orange, Telefonica, and Vodafone, contracted over 340 MW of renewable power capacity.

Link to the report –