Strong in PPA

Power purchase agreements (PPAs) in the area of renewable energies have been in use on the international energy markets for some time. These agreements are a great opportunity for the European energy markets: They promote the development of renewable energies and provide major European companies access to affordable, reliable, clean energy. Axpo is an expert in this business.

In many European markets the subsidies for renewable energies such as solar and wind will decrease significantly or be eliminated entirely in the foreseeable future. As a result producers will lose fixed feed-in remuneration payments. This is where international companies like Axpo come into the picture: Specialised providers and brokers for power purchase agreements are experiencing a boom in many countries. This is not only due to declining subsidies, but also because more and more major companies are focusing on PPAs to cover their energy needs. The fact that Axpo is present in 28 countries, active in 39 markets and knows the local market conditions is a strong advantage for future business.

Promoting wind energy

Axpo has been in the power purchase agreement business for many years. Several important contracts have been concluded. For example, Axpo signed a PPA for an onshore wind farm in Norway with LUXCARA, a leading asset manager for renewable energy investments in Europe. The wind plants are located on the Norwegian west coast and with their 33 turbines they have a capacity of 111.2 MW.

Axpo is also a leader in the wind business in Italy: In March 2018, the Unilever Group signed a power purchase with Axpo's Italian subsidiary to procure electricity from the WinBis wind farm in Southern Italy. Four of a total of 22 wind turbines will be rotating exclusively for Unilver: Power for Unilever's Italian works, where foodstuffs and chemical products are manufactured, will be supplied with electricity from the WinBis wind farm over the three-year period from 2018 to 2020

First non-subsidised solar plant

Axpo is also active in Southern Europe: Under a PPA extending to the year 2029, Axpo offers a long-term price and supply guarantee for the generated solar power from a newly constructed photovoltaic plant in Portugal. Significant here is that for the first time ever a Portuguese solar plant can be operated without any subsidies thanks to the PPA. The photovoltaic plant will take up operation in mid-2019. The yearly production is estimated at about 50 GWh, corresponding to the average annual consumption of 14,000 households. With the project, Axpo has not only laid the foundation for the development of similar construction projects in upcoming years, but is also is developing a new business field.

The future lies in PPAs

Experts agree that the PPA trend will continue growing: By the year 2030, fully commercially operated wind power plants that do not benefit from government subsidies could be generating up to 155 TWh of electricity annually from wind – enough to cover the yearly power needs of a country like Poland. Experts estimate that the installed wind energy capacity will increase by 50 GW by 2020 and by 166 GW by 2030 amounting to 323 GW. This increased capacity in combination with the expected reduction of governmental subsidies in many markets will likely drive significantly more market-players to use power procurement agreements as in the past because the uncertainty of power prices and volumes will increase for renewable energy producers and customers. According to industry circles, power procurement agreements with corporations are often viewed as the "super weapon" for the power markets in this environment.