Long-term electricity supply contracts – PPAs offer enormous potential in Germany
The potential of power purchase agreements (PPAs) in Germany is enormous: at least 13 percent of commercial electricity requirements could be covered through long-term electricity supply contracts. This was the result of a study by Aurora Energy Research, an energy market modeling and consulting company. But this billion-dollar potential has not yet been exploited in Germany.
Long-term electricity supply contracts without state funding
Long-term electricity supply contracts play a major role worldwide: they enable renewable energy systems to be financed without government funding. But Germany is still at the very beginning here. The situation is completely different in the USA, Scandinavia, Portugal, Spain and Great Britain. There, more and more long-term electricity supply contracts are being concluded between commercial electricity consumers and system operators. In the last two, for example, PPAs for around 4.3 gigawatts of power plant capacity have been concluded in Scandinavia, according to Aurora.
Increasing demand expected in Germany
However, since EEG funding is slowly being phased out for older systems, the attractiveness of PPAs is increasing. The very low level of interest from electricity consumers to date is due to expensive financing and, as a result, lower profitability. Aurora Energy Research expects demand to continue to increase as technology costs fall. But it’s not just from a cost perspective that long-term electricity supply contracts are becoming more attractive.
Positive image and stable electricity prices
As part of the climate debate, customers and investors are placing increasing value on companies’ social and environmentally conscious commitment. Companies can therefore improve their image by purchasing green electricity. PPAs also bring stable electricity prices because they are fixed for the entire term. For operators of wind power and photovoltaic systems, financing through long-term electricity contracts can reduce capital costs and risks. In addition, the taxes on electricity prices are reduced for end customers. BayWa r.e. is currently implementing the Barth V solar park with PPA, i.e. without state funding.
Market volume of 2 billion euros
Industry and commerce in this country consume around 380 terawatt hours of electricity per year. If around 50 of the 200 largest companies purchased their electricity via PPAs, that would correspond to an additional renewable power plant capacity of 17 and 23 gigawatts. The market volume is around 2 billion euros. A further 6 – 8 gigawatts of power plant capacity would be added by utilities if the coal phase-out is implemented as planned. Measures such as a government guarantee could also give small and medium-sized companies with poor creditworthiness access to PPAs. The market volume continues to increase and accelerates the energy transition.
The short presentation “Can PPAs take the energy transition to the next level? – the market of renewable PPAs in Germany” on the study by Aurora Energy Research provides interesting background information.
A greenValue article by Laura Vyhnal appeared on June 27, 2019.
Source: June 27, 2019, www.greenvalue.de