Corporate PPAs: A key tool for SEE’s road to Net Zero

Corporate PPAs: A key tool for SEE’s road to Net Zero

By Pavlos Trichakis, Jenn Vasileiadi and Nicolas Kyriakoglou at Baringa.

Europe is in the midst of an energy transition. Building a new green economy, compatible with Net Zero, will require the mass-scale development and installation of wind turbines, solar farms, battery storage facilities and other low carbon infrastructure — such as hydrogen electrolysers — across the continent. These developments will have dramatic implications in the way we produce and consume electricity.

Typically, when developing utility-scale renewable energy projects, there are three route-to-market options, each with different risk-reward trade-offs:

1) Government-backed contracts such as Contracts for Difference (CfDs) which in Europe are usually allocated via competitive auctions;

2) Power Purchase Agreements (PPAs) which are signed between project developers and either utilities/traders (“utility PPAs”) or large Commercial and Industrial customers (“corporate PPAs”);

3) Merchant business models, where the electricity produced is sold directly in the wholesale market.

This article focuses on corporate PPAs (cPPAs), which are on the rise in Europe, as large Commercial and Industrial (C&I) customers are increasingly seeking clean electricity to power their business activities. In turn, their efforts to decarbonise put pressure on their supply chain to do the same, creating a virtuous cycle of demand for such contracts.

For buyers, cPPAs can lead to significant economic, environmental, and social benefits, coupled with cost certainty and more predictable financial planning. For sellers, cPPAs with credit-worthy offtakers can provide stable revenue streams that can help secure project financing and boost equity returns. They also represent the main mechanism by which project developers can establish long-term relationships with end clients.

Whilst most cPPAs in Europe have historically been signed in Western and Northern Europe — Spain, Great Britain, Sweden, Norway, and Germany are the five largest European cPPA markets today — there is some evidence that the cPPA market is also growing in Southeast Europe (SEE), albeit at a considerably slower pace.

The table below presents a list of publicly announced cPPAs recently concluded in SEE. For context, the total annual electricity consumption in SEE is close to 300 TWh, of which approximately one-third — 100 TWh — is consumed by large C&I customers. Assuming that half of this demand could be covered via long-term cPPAs with renewable energy producers and an average cPPA tenure of 10 years, the market size for cPPAs in SEE could be as high as 5 TWh per year. Additionally, if C&I customers also require “additionality” — a concept where the consumed electricity must come from renewable power plants that would not have otherwise been constructed — then the cPPA market in SEE could support 1.5-3 GW of new-build renewable energy capacity per year, depending on the mix of solar and wind projects.

Deal date





Asset capacity (MW)

Contracted supply (GWh/a)

Tenor (years)

Q1 2021



Egnatia Group





Q2 2022




A1 Bulgaria




Q1 2022




Multinational automotive company




Q1 2022



ID Energy Group





Q3 2022



Professio Energia

Hrvatski Telekom




Table 1: List of publicly announced long-term renewable energy cPPAs in SEE. (Note that this list excludes utility PPAs, where utilities/traders enter into renewable energy PPAs and may then re-sell the contracted volumes to C&I clients.)

The table also illustrates that despite the extreme volatility and record prices observed in European energy markets in 2022, large C&I customers in SEE have been relatively slow to embrace the trend of long-term renewable energy PPAs. This is because there are several barriers hindering the development of the SEE cPPA market, including:

1) Regulatory barriers, such as in Romania, the Government reinstated directly negotiated PPA contracts only in January 2022, following a 10-year ban;

2) Concerns around market intervention increase the risk of entering into long-term contracts, particularly in markets with a track record of retroactive intervention for renewable energy projects such as Greece, Bulgaria and Romania;

3) Poor or non-existent liquidity in forward electricity markets in SEE with the exception of Hungary;

4) Lack of experience and sophistication among Large C&I buyers to negotiate complex PPAs. Contracts are still “first of a kind”, with little standardisation. This limits the pool of eligible buyers to companies with strong credit ratings and large energy procurement departments, capable of purchasing volume and price risks;

5) Finally, the majority of lenders in SEE are still not very familiar with cPPAs and often have highly risk-averse requirements to reach ‘bankable’ terms or ask for expensive guarantees.

While this list of barriers may appear daunting, there are several successful policy examples in other European countries that SEE policymakers may look to emulate in order to accelerate the deployment of cPPAs. Spain, for example, took steps in 2020 towards encouraging cPPAs by creating a EUR-600-mln reserve fund, the ‘FERGEI’ fund. FERGEI provides loan guarantees to long-term renewable PPAs with a minimum term of five years and can cover up to 80% of the non-payment or insolvency risk from the power purchaser. Beneficiaries are companies certified as Electro-Intensive Users by the Spanish authorities, with the Spanish Export Credit Agency (CESCE) acting as the managing agent of the fund.

France recently followed suit by creating a fund, to be managed by French lender Bpifrance, that will cover default risks for industrial buyers, enabling contracts for up to 500 MW of cumulative installed capacity. The terms of the compensation granted to contracts in default will operate on a mode close to additional remuneration. The fund will be self-funded by the premiums paid by guaranteed contracts and the recovery of part of their excess income, in the event of high market prices.

To conclude, while barriers and regulatory drawbacks still exist, one thing is clear: cPPAs will be an important mechanism for ensuring the financing of sufficient volumes of renewable energy projects to meet Net Zero targets. Governments, policymakers, consumers and producers in SEE are called to work closely together to develop a thriving C&I market for clean electricity, at the centre of the energy transition in the region.

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