Power Purchase Agreements (PPAs): new solution for a more sustainable European energy landscape?

August 23, 2018

Hat: Power Purchase Agreements (PPAs): new solution for a more sustainable European energy landscape?

Funding Scheme: 2018-08-23

Amorce:

While the energy sector is constantly changing, more and more European companies, including French companies, are seeking today to change their energy mix by incorporating more renewable energy through Power Purchase Agreements (PPA).

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Initiated in the US in 2010 by Google, PPAs are long-term purchase agreements for renewable energy (wind or solar), signed directly between a consumer and an energy producer. This type of contract allows companies to both achieve their CO2 emissions targets, increase the share of renewable energy in their energy mix, while giving them access to a competitive energy source with a long-term (ten to twenty years) fixed price.

If PPAs are common practice in the US (dozens of contracts have been signed by the GAFA since 2013), why has it taken so long for Europe to catch up? Until now, companies have been able to obtain competitive prices on the wholesale market but recently, green energy has become more attractive because less expensive. In Europe, long-term contracts have been negotiated in Great Britain (HSBC, Nestlé), the Netherlands (DSM, Google, Philips) or Sweden, countries which have been followed more recently by their Latin neighbours, and particularly by France. In fact, last June, SNCF and Aéroports de Paris launched consultations to source renewable energy according to this model, and more and more tenders of this type should follow those already launched this year. Paula Abreu Marques, Head of Unit for Renewables and CCS Policy at DG Energy in the European Commission and responsible for defining and steering the EU renewable energy policy, spoke also lately in favour of the PPAs. As part of the Energy Union, PPAs would also allow the Member States to reach the binding renewable energy target of 32% by 2030, compared to the 27% initially proposed by the Commission.

Nevertheless, despite significant growth, PPAs are still an untapped resource in Europe and it seems necessary today, to discuss how the supply of renewable energies by European companies could be facilitated and the existing legislation clarified. It would also be interesting to provide guidelines and model contracts to create more streamlined processes and open the market to smaller companies.