The viability of large-scale solar and storage projects in Europe and Latin America today finds a key tool in bilateral Power Purchase Agreements (PPAs). For ABO Energy, the development of the Valdezorita photovoltaic park in Spain illustrates how these instruments can guarantee bankability even in challenging markets.
“Valdezorita stands out as one of the largest PV projects ABO has ever carried out,” states Ingo Burdack-Debes, General Manager for Finance and Sales in Ibero-America at ABO Energy, in an interview with Strategic Energy Europe. The executive highlights that the PPA contract was an “essential element for financing” the park, not only for securing a long-term loan, but also for selling the asset to an investment fund. The agreement allows the “project cash flow to be secured for the first ten years,” adds Burdack-Debes.
The advancement of the PPA model is also linked to the growth of storage projects, a line that ABO Energy prioritises in several countries. “Batteries play an important role both in hybridising existing and new projects, as well as in stand-alone installations,” details the executive during the interview. Currently, the development of these solutions is focused on Spain and Germany, although the maturity of financing still presents barriers: “Banks are still somewhat reluctant, but we already see it slowly opening up.”
The storage strategy depends, he explains, on the design of profitable commercialisation models: “In the end it all depends on the battery’s commercialisation model.” The banking formula remains traditional: the greater the exposure to market risk, the lower the bankability.
Germany, a market with lessons to incorporate
In addition to being the company’s country of origin, Germany still accounts for the majority of ABO Energy’s activities due to the favourable regulation that promotes renewable energy. However, Burdack-Debes believes that other geographies are setting the pace in terms of financial and technical innovation. “I think it’s the other way around: we learn a lot from other markets that can be transferred to Germany, such as hybridisation in saturated markets, merchant financing and PPAs.”
Bankability conditions and market evolution
The executive admits that financial closure for storage projects in Europe still faces obstacles. “There is still little appetite from banks. Everyone is looking at the segment, but everyone is waiting for the first bank to move,” he states. In this context, the most effective instruments are not necessarily subsidies, but rather PPA models that guarantee stable and predictable cash flows: “The more market risk the project assumes, the less bankable it becomes.”
Regarding the evolution of the PPA market on the continent, Burdack-Debes underlines its growth in recent years. “An essential condition for PPAs to work well is the existence of transparent and liquid markets, with both spot and forward products.” The consolidation of these conditions has allowed for the standardisation of contracts, facilitating both financing and risk management.
The role of auctions and the potential in Latin America
In emerging markets, ABO Energy considers that state incentives are still useful, especially to build trust among investors and financial institutions. “The bilateral PPA scheme can be sufficient as long as there is a liquid market with enough supply and demand,” warns Burdack-Debes. In Latin America, the company identifies a mixed scenario: “It seems to work more or less well in Colombia, whereas in Argentina, although it is going through a period of transition, things are somewhat more complicated.”
Geographic focus and future opportunities
Although ABO Energy operates in several countries on the continent, it concentrates much of its European strategy in three of its largest and most important markets: Germany, France and Spain. For the company, these countries provide the necessary elements for sustainable growth: “Stable regulation, access to financing, demand for green energy, and prospects to explore new technologies and business models,” enumerates Burdack-Debes.
Looking ahead, the executive projects that trust, technical knowledge and creativity will be key to unlocking the bottlenecks that currently slow down the financing of new technologies such as storage.
