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EU revenue cap hampers PPP market in tough time – pv magazine International

The RE-Source 2022 event is taking place this week in Amsterdam amid what is being described as “the perfect storm” of challenges for the European PPA market. Prices have skyrocketed, which continues to hamper accelerated development, and a new political decision by the European Commission has only added to market inertia.

There is universal consensus that company power purchase agreements, a key solution to the current energy crisis in Europe, will accelerate the deployment of renewables, but their adoption is currently stalled due to a perfect storm of policies, permits and prices. That was the clear message from day one of RE-Source 2022, which this week brings together corporate buyers and developers of renewable energy projects in Amsterdam.

The emergency measures taken at European level to cap the revenues of electricity producers put a pause on the signing of corporate PPAs at a time when they are needed more than ever. The European Commission met with energy ministers from member countries on September 30, where they agreed on a suggested revenue cap of €180 ($175)/MWh for electricity generators that do not use the gas as fuel, in order to protect European electricity consumers. .

These “surplus revenues” above €180/MWh must be collected by governments. However, the outcome of the meeting was a recommendation on the revenue cap, among other measures, and European member states were left to adopt their own market interventions.

The Head of Unit of the European Commission’s DG ENER, Paula Abreu Marques, noted that “important decisions regarding the energy crisis are taken almost daily”. The result of the September 30 ruling is that corporate and industrial buyers and developers and owners of renewable energy projects are reluctant to sign new PPAs, while chaos reigns.

“The main problem is that this is a European regulation, but not a uniform European law,” said Dries Acke, policy director of SolarPower Europe. photo magazine. “The [European] The Commission came up with an EU revenue cap. But Member States demanded the flexibility to do something else, to go below, above or [introduce] specific technology [measures]. This is just an indication of what the EU would ideally like you to [member states] do, that’s where the uncertainty comes in.

Corporate renewable PPAs are down year-over-year in 2022.

Picture: SolarPower Europe

The variation at EU Member State level is already evident. In Belgium, discussions are underway to set a revenue cap of €130/MWh, below European regulations.

“Member states feel very comfortable doing whatever they want,” Acke said, noting that the uncertainty has a “chilling” effect on the European PPA market. “If you enter into a PPA and you don’t know exactly what level of revenue you will need to maintain, you face uncertainty in your metric that is new.”

At the RE-Source event, business buyers lamented the situation. Google’s global head of data center energy, Amanda Peterson Corio, said that, like other companies, the tech giant is still digesting the results of the September 30 meeting. She noted that it is unclear how long the market intervention will last.

“There were suggested dates in the Friday guidance,” Corio said, speaking on the first day of RE-Source 2022.

The The European Commission has indicated June 30, 2023, as a potential date, but there are fears that the revenue cap will be extended.

“We need a better understanding of the timeline, so we know how to assess that,” Corio added, noting that Google has contracted about 7 GW of clean energy globally to power its data centers.

Philipp Pfefferle, director of BASF Renewable Energy, said the intervention should be as short as possible. He noted that the company does not want to see an extension to the suggested end date of June 30, 2023. BASF, the world’s largest chemical company, uses 6 TWh of electricity per year at its plant in Ludwigshafen, Germany, enough to power 2 million European homes.

Frustratingly, with the PPA market largely at a standstill, there is universal agreement at RE-Source that accelerating the adoption of renewables is the key solution to the current energy crisis, to ensure the security of supply, costs and sustainability. However, there is hope that the PPA market will persevere, despite the short-term challenges.

“Price caps can be well intentioned, they can have many unintended consequences,” said Edward Northam, Head of Baseline Renewables at Macquarie Green Investment Group. “But the fundamentals of the market are so solid that we are ready to work on it. »

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