The Spanish PPA market remains healthy, showing an increase compared to early 2024 and late 2023, with optimistic prospects for 2025.
According to Francisco Del Río de Pablo, Associate Director of Electricity Sales in Europe at NTR plc, prices in Spain “will remain stable with slight increases throughout the year.”
In an interview with Energía Estratégica España, he explains that demand will grow due to the increasing installation of data centers and the large renewable supply targets in corporate contracts; in addition, the deployment of storage, boosted by capacity auctions, will also stimulate the market, allowing it to “overcome the larger supply of solar PPAs.”
The analyst further emphasizes that the global context, with ongoing conflicts in the Middle East and Ukraine, will not help stabilize natural gas prices and, consequently, electricity prices in Europe.
Looking back, he notes that 2024 saw an increase in PPA contracts, especially towards the end of the year, despite significant challenges such as the emergence of negative prices in the daily market, experienced for the first time during spring.
Del Río de Pablo argues that the rise in both negative price hours or €0/MWh and extremely high prices “should attract more buyers and sellers interested in signing PPAs, at least for part of their portfolio, as greater visibility into costs and revenues makes financial planning easier.”
In this regard, the integration of storage into the system will not only help mitigate negative prices but also contain extreme peaks.
Consistent with dynamics observed in Europe, where the Pexapark composite index reached 51.1 EUR/MWh in November 2024 after a 3.8% month-on-month increase, PPA prices in Spain remained stable, showing only slight marginal changes.
A notable aspect of the Spanish market has been the growing interest in cross-border virtual contracts, particularly in the solar sector, which reinforces the importance of this technology within decarbonization and energy diversification strategies.
One of the most significant phenomena has been the increasing interest in hybrid PPAs, which combine wind and solar energy.
Although the supply of these contracts is still limited compared to solar PPAs, demand from buyers has not slowed down transactions in the solar market.
Del Río de Pablo predicts that hybrid PPAs will gain prominence in the coming months, driven by the growing energy storage capacity in Spain.
“The development of 13 GW of storage with access points granted in transport and distribution, along with the capacity auction mechanism, will facilitate the expansion of this type of contract,” he notes.
Competition and Prices in the PPA Market
The market has experienced strong competition on the supply side due to the granting of construction permits for nearly 25 GW of photovoltaic projects during the summer.
This increase in supply has pressured PPA prices downward, bringing them closer to €35-40/MWh for 10-year contracts under the “Pay as Produced” scheme, according to the advisor.
However, he warns that these prices, in some cases, “are not sustainable if we consider the inherent risks of price, volume, and curtailment.”
Despite this initial downward trend, long-term PPA prices showed a recovery by the end of 2024, driven by rising gas prices.
“The increase in spot prices and futures for 2025 highlights the economic advantages for buyers who secure their supply through long-term PPAs,” explains the expert.
This context strengthens the relevance of PPAs in a market where dependence on gas remains high, especially during the winter months.
The Role of the Capacity Market
The ongoing public consultation on the capacity market, open until January 29, introduces a mechanism designed to strengthen supply security and facilitate the integration of renewables.
This market will allow the participation of low-emission generation, storage, and demand, offering a significant opportunity for PPAs.
However, Del Río de Pablo concludes, “We will have to look at the fine print of the mechanism, and possibly adjust clauses to avoid incompatibilities between this system and the energy delivery commitments in the PPA.”
0 Comments