Europe signs PPAs for 16.2GW of renewables in 2023, including 10.5GW of solar


Europe also signed a total of 272 PPAs in 2023, a 65% increase over the number of deals signed in the previous year. Encouragingly for the solar sector, much of this growth was driven by the solar industry. Pexapark reports that 160 deals were signed for solar projects, for 10.5GW of capacity, more than double the capacity of deals signed involving onshore and offshore wind combined.

Graph showing the capacity of solar and wind accounted for in PPAs, between 2018 and 2023. Credit: PV Tech

The graph above demonstrates how solar dominated the European renewable PPA space in 2023, with a greater capacity of solar projects accounted for in deals in 2023 than all renewable power sources in 2022. Pexapark noted that Spain has accounted for the vast majority of solar PPAs in Europe, with 14.2GW of deals signed since 2018, including Solarpack’s signing of a 49.8MW PPA as recently as last December.

Spain has also been an effective example of multi-buyer PPAs, which Solarpack said was “maturing in an accelerated manner” in Europe in 2023. These deals, in which multiple off-takers acquire power from the same portfolio, have become particularly common in the solar sector, with Pexapark noting that four such deals were signed in Europe in 2023, including one involving ib vogt in December, while no such deals were signed for the wind sector.

The analyst also highlighted hybrid PPAs, those involving both power generation facilities and co-located storage, as a growing part of the European renewables sector. In June, equity fund DIF announced a hybrid PPA for a 55MW solar farm in the UK, alongside a 40MW/80MWh battery storage facility, and growth of deals such as these could help the European renewables sector become more resilient.

“Across key markets in Europe, a significant pipeline of hybrid assets is ready to take if contractual arrangements can make the financial model bankable,” said Brian Knowles, director of storage and flexibility and Pexapark. “We believe hybrid PPAs for merchant assets will move beyond Great Britain. Due to cannibalisation risk, Spain’s solar-plus-storage segment is expected to spike in a few years.”

Challenges for baseload PPAs

However, the Pexapark report notes that baseload PPAs are seeing diminished interest across Europe, and across power generation technologies. Such deals typically span multiple years, and involve a seller committing to a fixed set of MWh over that period for a fixed price. While this can be an attractive prospect for buyers, as such deals are protected from short-term price fluctuations, sellers can be hesitant to sign baseload PPAs due to concerns that they won’t optimise their earnings if the price of electricity changes.

According to Pexapark, baseload PPAs accounted for less capacity in 2023 than the 2GW of capacity in 2022, with just three deals being signed. Just one of these deals concerned solar projects in particular, and saw just 76.5MW of power generation capacity change hands, reflecting a growing concern that the variability of solar power in particular makes it an unattractive investment considering the fixed prices associated with baseload PPAs.

“Onshore wind baseload PPAs still attract some interest, especially when underpinned by the right risk management approach,” said David Willemsen, head of risk advisory at Pexapark. “But for solar PV it’s more challenging.

“Last year, we held a large study in the Iberian market across the financing community, where all participant lenders disclosed they were not comfortable with baseload plus PV, but they were willing to discuss onshore wind either on a monthly or annual basis.”

Looking ahead, Pexapark makes a number of forecasts for the European PPA market in 2024, including that Germany will make more deals than Spain, hybrid PPAs will become more commonplace outside of the UK, and Europe will exceed more than 20GW of capacity accounted for across around 350 deals this year, both record figures.

Our publisher Solar Media is hosting the 11th Solar Finance & Investment Europe conference, 31 January – 1 February at Park Plaza in London. Discussion topics will include renewable capital allocation, scaling European solar and maximising returns for solar-plus-storage projects. See the official site for more details.



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