The negotiation of renewable energy PPAs has evolved significantly in recent years, shifting from a market dominated by sellers to an environment where buyers now hold greater influence.

“Two or three years ago, sellers set more favourable terms, backed by high price expectations. Today, buyers are more informed and demand greater flexibility,” explains Álvaro de Simón, an independent renewable energy consultant.

In an interview with Strategic Energy Europe, he describes that this paradigm shift is due to buyers’ increased familiarity with pricing structures and market dynamics, as well as access to analytical tools that allow them to negotiate from a position of strength.

He shares three key areas where he recognises changes or adjustments due to the new characteristics of the market:

1. Inclusion of Clauses Protecting Against Negative Prices and Extreme Volatility

According to De Simón, the drop in prices, driven by an excess of solar and hydro generation, highlighted the need for these mechanisms.

“Buyers are seeking adjustment mechanisms such as zero-price settlements or participation in ancillary services to mitigate risks,” he details.

These clauses help manage adverse scenarios and ensure that both buyers and sellers can optimise their revenues, maintaining balance in the market.

2. Dynamic Pricing Structures in Contracts

“You can no longer offer a fixed price for 10 years without justification. Buyers now expect flexible structures that reflect market volatility and real-time behaviour,” explains the consultant.

In this regard, contracts have evolved. Instead of fixed long-term prices, the new models include discounts off market prices with lower limits (floors).

These changes, driven by price uncertainty and access to detailed projections, have made it more difficult to sign new PPAs and caused delays in several negotiation processes.

3. Integration of Storage: A Cornerstone in PPAs

Energy storage has transitioned from being a complementary addition to becoming a key element in renewable projects.

“Proposing an advanced project without storage is almost reckless,” emphasises De Simón. This trend, supported by the new capacity market design under public consultation, aims to ensure greater stability and flexibility in the electricity grid.

Furthermore, developers are exploring hybrid models that integrate solar generation with batteries, extending the supply hours and optimising revenues.

Storage addresses the need to stabilise prices and ensure supply, particularly in high volatility scenarios.

Developers are adjusting contracts to incorporate shared revenue models between solar generation and batteries, optimising the opportunities presented by dynamic market prices.

“It’s not just about generating energy, but understanding how to capture the maximum value throughout the day,” he adds.

Recent data confirms the importance of this strategy. In Spain, where intraday prices can fluctuate by up to 300% between peak and off-peak hours, hybrid renewable energy models with storage represent an effective solution to meet market needs.

However, the consultant warns that “the integration of batteries into PPAs still faces regulatory and cost challenges, particularly when compared to more advanced markets like Italy or Portugal.”

Towards a 2025 of Consolidation and Diversification

Looking ahead to 2025, the renewable PPA market is shaping up to be one of consolidation and diversification.

“Buyers are looking for projects that combine solar with storage or more innovative proposals that offer stability guarantees,” notes the consultant.

The design of the capacity market will be critical to unlocking new projects and promoting the integration of advanced technologies in the renewable sector.