Financing Opportunities for Power-to-X in Denmark: Are the Fundamentals Established?

Financing Opportunities for Power-to-X in Denmark: Are the Fundamentals Established? Get in touch Last week (04/06), PwC published a survey of 36 active players in the Power-to-X market, highlighting the critical role of financing. While 50% of respondents expect to reach FID within two years, industry experts deem this timeline unrealistic under current conditions with lacking infrastructure, uncertain regulatory frameworks, and complex value chain management. Potential demand and potential supply for of greener alternatives like green hydrogen, ammonia, and methanol are strong, with both sides eager to transition from conventional fuels. Denmark, with its favorable geography and expertise in renewable energy, is well-positioned for this transition. However, the shift requires a complex transformation of the energy sector, necessitating a robust regulatory framework and transparent business practices to attract investors and unlock Power-to-X’s potential. The business case development is further complicated by the complex nature of the energy market where the fundamentals shift according to the energy transition highly impacting the feasibility of Power-to-X. Investors require solid business plans with “Proof-of-Concept,” long-term agreements such as PPAs, and trusted management to ensure stable operations. Power-to-X’s success hinges on the supply of renewable power, determining the hydrogen’s “greenness”, production profile, and cost of operation.Denmark’s energy mix supports high capture rates especially with PV, as seen with European Energy’s plant in Kassø, though operational hours are a trade-off. Additionally, electrolysers require a substantial water supply, restricting potential plant locations. Fact Box: Water Requirement: A plant producing 1000 Tonnes per Annum (TPA) of hydrogen requires 9 L of ultra-pure water per kg of hydrogen, and 1.5 L of groundwater per 1 L of ultra-pure water, amounting to 13,500 m3 of groundwater annually, equal to the average groundwater consumption in 300 private persons. Conclusion: Water is not an issue  Transport Challenges: Considering a 10 MW Power-to-X plant with a mix of solar and wind ensuring 5000 full-load hours (57%), and a 67% efficient electrolyzer, it would produce approximately 1000 TPA of hydrogen. Transporting this hydrogen in 500 kg tube-trailers would require 2000 trucks annually. Conclusion: Transport is an issue (Hydrogen pipeline etc. is key)   Hydrogen, the smallest molecule, needs significant compression or space for transport. Without a pipeline to Germany, large-scale hydrogen transport from Denmark is infeasible. Without clear plans and timelines to establish the needed infrastructure, the risk of transportation risk is a crucial decisive factor. Electrolyzer technology for large-scale operations is still emerging, indicated by low TLR (Technological Readiness Level), increasing OEM risk. Different technologies have varying operational patterns, influencing their role in ancillary services, a potential revenue stream. The fundamentals of for Power-to-X in Denmark are visible but not well-established. Acknowledging the uncertainties prevalent reveals a sector with high potential and high risk. Technology is nothing without capital and capital is nothing without technology.Ensuring long-term financing entails a need for long-term certainty for investors, significantly enhancing the need for concluding long-term agreements with suppliers and off-takers. Investor Perspective Investors view Power-to-X investments with caution due to inherent uncertainties. Early developments need strong leadership and reputable partners to attract investment and enhance local impact. Leveraging the local economy is crucial; utilizing residual heat from hydrogen production for district heating or fostering new investments can strengthen the business case and reputation.Identifying additional value components that can be exploited enables revenue stacking through ancillary services, district heating, flexible optimization against the spot market and PPA which is fundamental in establishing sound business cases. The “First-mover” advantage is not evident in gaining finance, as investors prefer a proven track record. Current OEM supplies offer a two-year efficiency guarantee, presenting a significant risk for the business case with potential vulnerabilities in long-term agreements. Projects are expected to operate for 10-15+ years, making PPAs crucial for cost mitigation and alignment with EU RFNBO production requirements. HPAs (Hydrogen Purchase Agreements) are needed to ensure stable offtake with foreseeable revenue streams and strong partnerships to build a solid business case. The development of Power-to-X is complex. Project developers need financing to deploy their projects, and financiers need deployed projects to assess risks and attractiveness. Both sides share excitement and vision but are interlocked in their positions. Bridging the Gap Our New Energy seeks to be the missing link between project developers and investors, aligning expectations and realizations to ensure feasible and healthy business case development. ONE can assist in navigating through regulatory framework, identifying components for revenue stacking, applications for public tenders, and feasibility studies.With our extensive knowledge and proven track record in transactions through PPAs, we offer insights and expertise from business case development to transaction completion. Feel free to reach out for more information and support in your Power-to-X ventures. Recent Post Financing Opportunities for Power-to-X in Denmark: Are the Fundamentals Established? Financing Opportunities for Power-to-X in Denmark: Are the Fundamentals Established? Get in touch Last week (04/06), PwC published a survey… Learn More 10 de June de 2024 The energy transition puzzle has not a single solution The energy transition puzzle has not a single solution Get in touch ONE’s Partner Jakob Bendixen on the Danish GreenLab,… Learn More 1 de April de 2024 The Silverlining: BESS and the Future of Renewables in Spain PPAs: why Italy only witnessed a few corporate cases Get in touch The Silverlining: BESS and the Future of Renewables… Learn More 14 de March de 2024 Cargar más

The Silverlining: BESS and the Future of Renewables in Spain

PPAs: why Italy only witnessed a few corporate cases Get in touch The Silverlining: BESS and the Future of Renewables in Spain In the ever-evolving landscape of Spain’s energy market, a recent development has caught the eye of industry experts and stakeholders alike. The captured prices for photovoltaic energy have experienced a significant downturn, a scenario attributed to an abundance of sunlight and unusually mild temperatures across the Iberian Peninsula. This trend aligns with our projections at Our New Energy, yet it raises pertinent questions about the future of the renewable sector, as astutely noted by Rubén Esteller (link). This downturn in prices arrives at a particularly precarious moment. Spain is at a crossroads, with over 40GW of renewable projects in limbo, awaiting final authorizations amidst bureaucratic delays (link). These projects, unable to secure final permits can/should not sign PPAs and find themselves on the brink of economic and executional collapse. Low electricity prices seem beneficial for taxpayers; the paradox: Excessively low prices deter investment in the energy transition and decarbonization efforts, posing a significant challenge to a sustainable energy transition. Amidst this backdrop of challenges, a hidden opportunity emerges for Battery Energy Storage Systems (BESS). Spain and Portugal, trailing behind their European counterparts in BESS regulation, now have a chance to leap forward. Countries like Germany, Netherlands, Poland or Italy have already implemented mechanisms to encourage investment in energy storage, recognizing its critical role in managing the intermittency of renewable resources. Current price scenario, with low prices projected to remain low, prompts a crucial question: How will the renewable industry adapt? The answer lies in support mechanisms, specifically, the introduction of auctions or capacity markets (link) (old story: taxpayers pay). This market is poised to offer a lifeline to technologies under strain also for BESS. BESS stands to benefit from the current market dynamics, capitalizing on the opportunity to store energy during low-price periods and release it when prices peak. This arbitrage revenue could redefine the investment landscape for storage in Spain, turning a significant solar challenge into a catalyst for batteries. As we navigate these turbulent waters, the reactions of the renewable industry, the trajectory of power prices, and the actions of policymakers will shape the future of Spain’s energy market. The unfolding scenario presents a compelling narrative of resilience, innovation, and the relentless pursuit of sustainability. What do you think? How will renewable industry respond? What trends will we see in power prices? And how will policymakers adapt to these new dynamics? Recent Post Financing Opportunities for Power-to-X in Denmark: Are the Fundamentals Established? Financing Opportunities for Power-to-X in Denmark: Are the Fundamentals Established? Get in touch Last week (04/06), PwC published a survey… Learn More 10 de June de 2024 The energy transition puzzle has not a single solution The energy transition puzzle has not a single solution Get in touch ONE’s Partner Jakob Bendixen on the Danish GreenLab,… Learn More 1 de April de 2024 The Silverlining: BESS and the Future of Renewables in Spain PPAs: why Italy only witnessed a few corporate cases Get in touch The Silverlining: BESS and the Future of Renewables… Learn More 14 de March de 2024 Cargar más

Our New Energy Expands in Central Europe with New Office in Germany

Our New Energy Expands in Central Europe with New Office in Germany Get in touch We are thrilled to announce that Our New Energy is expanding its presence with the opening of a new office in Germany. This strategic move marks an exciting milestone for our company and reaffirms our commitment to providing exceptional services to our clients in the region. The office will be primarily focused on serving our German, Dutch, and Central European activities (Austria, Switzerland, and Hungary). Leading the German office is Imre Vass, newly appointed partner at Our New Energy.  Imra Vass has more than 16 years of energy market experience, including as Lead Originator at a major European utility. He has worked on and closed PPAs in several key European PPA markets, and was one of the first people to work on market-term PPAs. “Our offering in these markets spans across PPA transaction and strategic advisory, hedge advisory,  P2X commercialization, and further energy market-related topics around sustainability and net zero.”  –  Imre Vass, Partner at Our New Energy and head of our German office By establishing a new presence in Central Europe, we aim to foster closer collaborations with our German clients, better understand their needs, and deliver tailored solutions that meet their specific requirements. We see a unique opportunity to help current and future clients expand in a market that is ripe for renewable energy projects. The new office, located in Munich, will serve as a hub for our operations, enabling us to offer localized support, enhance customer service, and build stronger relationships with our German and Central European partners. With a talented team of professionals, well-versed in the nuances of both the German market, as well as the Spanish, Hungarian, Austrian, Netherland, and Italian markets,  we are excited to start this new chapter. We look forward to serving our German and Central European customers, forging lasting partnerships, and helping promote renewable energy solutions. Stay tuned for updates and news about our new office as we embark on this exciting journey in Germany. For more information, please contact our team.  We will also be attending E-world in Essen, Germany, 23-25 May, 2023 – feel free to reach out. Recent Post Financing Opportunities for Power-to-X in Denmark: Are the Fundamentals Established? Financing Opportunities for Power-to-X in Denmark: Are the Fundamentals Established? Get in touch Last week (04/06), PwC published a survey… Learn More 10 de junio de 2024 The energy transition puzzle has not a single solution The energy transition puzzle has not a single solution Get in touch ONE’s Partner Jakob Bendixen on the Danish GreenLab,… Learn More 1 de abril de 2024 The Silverlining: BESS and the Future of Renewables in Spain PPAs: why Italy only witnessed a few corporate cases Get in touch The Silverlining: BESS and the Future of Renewables… Learn More 14 de marzo de 2024 Cargar más

Endesa signs game-changing PPA

Endesa signs game-changing PPA Get in touch The renewable energy sector is rapidly growing, with, luckily, no end in sight. Companies across various industries have been exploring opportunities to switch to renewable energy sources as a way to lower their carbon footprint and support the transition to cleaner energy. And in that transition, we are seeing some interesting first-ever events:  Our New Energy recently assisted our client, Sonnedix, in signing a 77MW Power Purchase Agreement (PPA) with Endesa, Spain’s largest utility company. The PPA includes five solar plants located in Valladolid, Castilla y León province of Spain, and is estimated to generate 156GWh of renewable energy annually. The projects are currently under construction and are expected to begin operations in the first quarter of 2023. Once operational, the solar plants will produce enough electricity to power over 50,000 homes, reducing more than 30,000 tons of CO2 emissions.  This deal is significant because it marks the first time that Endesa has announced a PPA with a renewable energy asset. The agreement is also an excellent example of how utilities can significantly influence energy transition because they have a unique position in the energy sector, with their intermediate position between electricity producers and consumers. This position puts utilities in a unique position to meet the needs of renewable energy investors as well as end users. “We are very excited to partner with a company like Endesa, who shares our commitment and drive to keep powering a bright future for all” said Axel Thiemann, CEO de Sonnedix states in a press release.   “We started off our journey in this country, over a decade ago, with a 0.9MW project. Today, our largest office is in Madrid, and our largest portfolio of operational projects is here in Spain, with over 175 projects and a total installed capacity of more than 785MW. Partnering with Endesa, one of the largest electric companies in Spain becomes a true testament to our sustainable growth trajectory, but also to our commitment to being a key player in the Spanish energy transition”. The transition to renewable energy sources is highly necessary and urgent. With more renewable energy projects being developed, power purchase agreements like this one between Sonnedix and Endesa will continue to play a crucial role in financing and supporting these projects.  Recent Post Financing Opportunities for Power-to-X in Denmark: Are the Fundamentals Established? Financing Opportunities for Power-to-X in Denmark: Are the Fundamentals Established? Get in touch Last week (04/06), PwC published a survey… Learn More 10 de junio de 2024 The energy transition puzzle has not a single solution The energy transition puzzle has not a single solution Get in touch ONE’s Partner Jakob Bendixen on the Danish GreenLab,… Learn More 1 de abril de 2024 The Silverlining: BESS and the Future of Renewables in Spain PPAs: why Italy only witnessed a few corporate cases Get in touch The Silverlining: BESS and the Future of Renewables… Learn More 14 de marzo de 2024 Cargar más

It always seems impossible until it is done – A PPA case of great importance.

It always seems impossible until it is done – A PPA case of great importance. Get in touch Everyone laughed at the idea of a flying machine until the Wright brothers took flight in 1903. While we are definitely not the Wright brothers, we recognize that changing our current energy systems requires being willing to do things for the first time. Innovation is not constricted to Silicon Valley but includes changing the way we use market mechanisms and make investments. In Our New Energy, we dare to do things differently. Holding excellent service at the core of our work, we always look for new ways to evolve the PPA market and serve our clients. Today, almost six years after the birth of Our New Energy, we are happy to announce another ’first’ in market-parity transactions: The first 10-year PPA in Cyprus, as a deal between our partner, Svea Solar, and the local utility, Evergy.  This PPA covers the delivery of energy from a solar asset producing around 5 GWh/year of green electricity over ten years, displacing more than 1.500 tonnes of CO2. In comparison, Cyprus currently has 335 MW of PV capacity installed. Where many other European countries have invested heavily in renewables, Cyprus is currently generating only 16% of its electricity via renewables while covering its electricity needs via oil and gas. This reliance on oil and gas imports is felt by electricity consumers on the island and has sparked interest in greener energy investments. The country is aiming for a 26% share of renewables in gross final electricity consumption by 2030, but hopefully, this is a low bid. The case is one of particular interest, as it proves the viability of renewable energy, even in the toughest of markets. Partner at Our New Energy, Dario Gallanti, notes: “Making PPAs a viable and scalable solution on a truly energetic island such as Cyprus, with an energy mix based on oil, and doing so without a properly liberalized market, makes this one of the most groundbreaking agreements in Europe.” Innovation doesn’t happen in a lack of obstacles. It happens in friction, in headwinds. That is how we make the impossible possible.  “Through this transaction, we have closed a very important milestone for the strategic investment plan we have in Cyprus. While the reform of the Cypriot electricity market towards the EU target model is only expected during H1-2023, this agreement will allow us to start the production of our assets already in the coming weeks and navigate the regulatory uncertainty of a fast-evolving market”. – Pontus Skog, Head of Utility Project Development at Svea Solar.   With Southern Europe being a core geography for ONE’s energy transaction activities, we are looking forward to continuing our support of companies that push the boundaries of innovation in the energy transition. Recent Post Financing Opportunities for Power-to-X in Denmark: Are the Fundamentals Established? Financing Opportunities for Power-to-X in Denmark: Are the Fundamentals Established? Get in touch Last week (04/06), PwC published a survey… Learn More 10 de junio de 2024 The energy transition puzzle has not a single solution The energy transition puzzle has not a single solution Get in touch ONE’s Partner Jakob Bendixen on the Danish GreenLab,… Learn More 1 de abril de 2024 The Silverlining: BESS and the Future of Renewables in Spain PPAs: why Italy only witnessed a few corporate cases Get in touch The Silverlining: BESS and the Future of Renewables… Learn More 14 de marzo de 2024 Cargar más

The EU electricity intervention package – What can we expect?

The EU electricity intervention package – What can we expect? Get in touch Responding to recent news about the comprehensive market intervention package currently being discussed in the European Union, Miguel Marroquín from Our New Energy has the following comments:   ”Overall, I think all this turmoil and considerations around the market design is coming quite late; these issues have been apparent for a long time, including at times when market prices did not support the investment into renewables. It is now obvious that the current marginalistic fuel-cost, merit-based mechanisms designed decades ago do not help the average consumer. “Market design does not work anymore” tells us something about the desired purpose of the market from the speaker’s perspective. Further, its proposed ‘solution’ tells us something about the understanding of how the market truly works and what needs to be fixed. Across Europe, renewables have been seen as the solution to the energy trilemma (the quest for sustainable, reliable, and competitive energy), yet these have always only been half-measures: We offered considerable incentives to deploy RES, which at times have been overly generous, at the expense of taxpayer’s energy bill. This was instrumental in creating the demand and the space for technology costs to reach market parity. However, we have been failing to empower and greet market-parity renewables, and there were never real incentives for the industries and consumers to ‘electrify’ their consumption. Hence, we still have a dependence on third-party fossil fuels. With the dawn of market-parity over the course of the past 5 years, there have been numerous discussions in the industry concerning ‘captured’ prices, curtailment, the introduction of negative pricing, ancillary services, PPAs, saturation in agencies delaying the development of RES, and many other problems related to these. Back then, these were not a priority for EU and national officials. Last summer, when electricity prices were in the 70-100€/MWh, I saw a journalist on TV saying such prices were the ‘toll to transit to a renewable-based system’… Recently, a close friend reports being in a room with an EU Energy Minister and his counsel and overhearing the sentence: “PPAs are neither regulated nor feasible here.” With this understanding and spirit, it’s no surprise to read about discussions on market intervention of unprecedented proportions that are still leaving a number of important unknowns and considerations open. These include: The new intervention package is proposed to introduce a price cap only on infra-marginal technologies (which is less a change in market design and more a discriminatory intervention into a portion of the market). Now, will consumers still pay the marginal price? Or the weighted average offering price? How exactly will the savings from introducing this cap result in a reduction of the energy bill for consumers? Because if not through the market-based portion of the energy bill, it might simply result in a pot of money redistributed arbitrarily, and that is not a great start for a transparent, democratic, and meritocratic process.   Nobody will disagree that any newly introduced policy should never undermine the access to energy and the plans to decarbonize Europe. I wonder what message it sends to investors in energy transition to see their plans persistently brought to question by ideas such as these?Last year, Spain’s Royal Decree-Law 17/2021 on natural gas prices (RDL 17/2021) required immediate revisions. It risked rendering thousands of mega-watts bankrupt because it overlooked how the mechanics of this decree-law interact with ‘private’ PPAs. If revisions had not been made, the country would have missed this tool to render investments in renewables bankable. As for the ‘effect’ of Spain enjoying a lower electricity price than its neighboring European markets, for those reading from abroad, this is thanks to another synthetic concept: The cap on gas price ­– but only for electricity generation. We let households and industries pay the full market price for gas but then compensate ‘behind the market’ for the difference between the real and caped gas price. That is how the ‘visible’ value of electricity market price is reduced, thereby limiting revenues for inframarginal technologies. An act worth of David Copperfield. Are we about the repeat that act?   Lastly, EU officials are weighing the creation of a ‘new bank’ to foster investment in hydrogen generation. I speak daily with investors in energy transition, and have yet to hear there is a shortage in capital. So how is a new bank solving a problem? And since hydrogen is produced through electrolysis which requires electricity, it only makes sense if that electricity is NOT produced with fossil fuels. Therefore, transiting to a hydrogen-based economy requires investing in renewables – like A LOT of renewable! Should policies not focus on making that transition possible? Or are we determined to re-regulate the market and waste the efforts of the past decades to liberalize it?   Overall, this new electricity market reform seems reactive, and we fear it won’t aid the consumers nor the green energy transition. Worst case, it will require officials to deploy an abundant patchwork in due time, cause damages to the industry, and ultimately require to tap from their endless source of capital: taxpayers.”   Recent Post Financing Opportunities for Power-to-X in Denmark: Are the Fundamentals Established? Financing Opportunities for Power-to-X in Denmark: Are the Fundamentals Established? Get in touch Last week (04/06), PwC published a survey… Learn More 10 de junio de 2024 The energy transition puzzle has not a single solution The energy transition puzzle has not a single solution Get in touch ONE’s Partner Jakob Bendixen on the Danish GreenLab,… Learn More 1 de abril de 2024 The Silverlining: BESS and the Future of Renewables in Spain PPAs: why Italy only witnessed a few corporate cases Get in touch The Silverlining: BESS and the Future of Renewables… Learn More 14 de marzo de 2024 Cargar más

Opdenergy signs one of the largest market-parity deals worldwide

Opdenergy signs one of the largest market-parity deals worldwide Get in touch We are proud to announce our involvement in the structuring, origination and negotiation of Opdenergy´s latest 750 MW PPA which is also one of the largest market-parity deals worldwide. We thank Luis Cid Suárez,Alejandro Alvarez Vazquez and Tomas Collantes as well as the rest of the Opdenergy team for having entrusted us with their more than 1400MW of renewable capacity in Spain. Even though the offtaker of this latest PPA has chosen to remain anonymous we would also like to extend our gratitude to them for their professional and flexible attitude during the negotiation and signing of the agreement. Recent Post Financing Opportunities for Power-to-X in Denmark: Are the Fundamentals Established? Financing Opportunities for Power-to-X in Denmark: Are the Fundamentals Established? Get in touch Last week (04/06), PwC published a survey… Learn More 10 de junio de 2024 The energy transition puzzle has not a single solution The energy transition puzzle has not a single solution Get in touch ONE’s Partner Jakob Bendixen on the Danish GreenLab,… Learn More 1 de abril de 2024 The Silverlining: BESS and the Future of Renewables in Spain PPAs: why Italy only witnessed a few corporate cases Get in touch The Silverlining: BESS and the Future of Renewables… Learn More 14 de marzo de 2024 Cargar más

Utility, aggregated PPAs may lure small firms – Experts

Utility, aggregated PPAs may lure small firms – Experts Get in touch Utility and aggregated power purchase agreements (PPA) could become the likely ways to lure small and medium sized enterprises (SMEs) into this market and help them with their clean energy procurement, experts told Montel. PPAs, seen as an important tool to help corporations decarbonise their operations and hedge their risks in the power market, have been growing at a fast pace in the past decade, mainly led by large corporations. However, smaller players have been left out because signing PPAs can be time-consuming and complex and many SMEs lack the human and financial resources and the knowledge to sign such deals. SMEs represent 99% of all business in the EU, according to the European Commission. For Miguel Marroquin, managing director of PPA transaction advisory firm Our New Energy, utility PPAs would be the simplest way for SMEs to tap into this market. “In the short term, utilities may represent the easiest option for SMEs to procure green energy and PPA contracts,” he said. “Utilities have a role to play because they are the gearbox that can swing from generators on one side to consumers on the other.” A utility would sign a longer-term 10-year PPA with the generator and grant a discount or a fixed price for the power it supplies to the SME if the consumer commits to buying its energy from that supplier for a three-to-five-year term, he said. For newly built assets, signing a short-term supply agreement with an SME would not be appealing as it would not offer investment grade payment guarantees required by banks and other financial backers, said Marroquin. “In Spain for example, if you look at our list of corporate PPAs, 90% of those deals are signed by a utility with large or small companies,” Marroquin said. Simple, aggregated deals For Brendan O’Flaherty, business development director at the marketplace for clean energy Squeaky, simplified and aggregated PPAs could be the best formula to “democratise” these deals and make them accessible to SMEs. An aggregated corporate PPA is when a group of companies collaborate and pool their power usage to purchase green and clean energy directly from the generator. For SMEs, banding together in an aggregated basket provides stronger bargaining power to help capture the best price by buying at scale, gain direct access to clean green energy and significantly lower process costs. Another key factor for this type of PPA is simplifying the contract, said O’Flaherty. “The PPA needs to be re-engineered,” O’Flaherty said. “It’s important to standardise the PPA and simplify it by cutting a 150-page document with a complex legal process to an easier-to-digest 15-page document.” Access to corporate PPAs Squeaky, which put together an aggregated PPA for 20 UK universities in 2019, is now executing similar initiatives to enable smaller companies to access corporate PPAs. In these basket deals, corporations have the flexibility to commit to a certain percentage of their energy consumption as a starting point, O’Flaherty said. “We’re not asking organisations to procure or hedge out all their energy. We’re offering the flexibility for them to do a percentage so they can protect against energy price volatility while giving certainty about the source of their energy,” he said. Recent Post Financing Opportunities for Power-to-X in Denmark: Are the Fundamentals Established? Financing Opportunities for Power-to-X in Denmark: Are the Fundamentals Established? Get in touch Last week (04/06), PwC published a survey… Learn More 10 de junio de 2024 The energy transition puzzle has not a single solution The energy transition puzzle has not a single solution Get in touch ONE’s Partner Jakob Bendixen on the Danish GreenLab,… Learn More 1 de abril de 2024 The Silverlining: BESS and the Future of Renewables in Spain PPAs: why Italy only witnessed a few corporate cases Get in touch The Silverlining: BESS and the Future of Renewables… Learn More 14 de marzo de 2024 Cargar más

Renewables, the price storm doesn’t scare off long-term contracts

Renewables, the price storm doesn’t scare off long-term contracts Get in touch Conversation with Miguel Marroquin from Our New Energy on the outlook onfor the PPA market, starting with the latest Spanish auction. “Energy prices will come back to stabilize but hardly under 40-50 €/MWh.” The Italian version is available here.   Five years ago it was hardly even considered to enter into a ten-year renewable energy supply agreement, explains Miguel Marroquin, Partner and Managing Director at ONE – Our New Energy. Today the Spanish advisory firm that operates in the structuring, negotiation and closing of market parity PPAs across Europe having closed around  3 GW of long-term contracts on the Iberian market alone – is looking without undue concern at the  rally in wholesale energy prices, which is also affecting the long-term prices for new investments in wind and solar. In the latest Spanish auction, the average auction price increased by 20% compared to the previous one to over 30 €/MWh. Is the reason the spike in gas prices or is there something else going on? There are two factors: the first is the fact that future markets are much higher than last January. Then there is the increase in the cost of components, commodities (such as iron and aluminum) as well as transportation costs. On the gas side, the reasons for the rally are primarily related to the economic cycle. Commodities as well as capital markets have cyclical trends: with the awakening of the economies from the pandemic with demand unsurprisingly increasing with the recovery. Additionally, we must consider the altered dynamics of the gas market, particularly LNG, which has made the gas market more global, thus putting European demand in competition with the rest of the world. Finally, in the astronomical values of the spot prices from the last weeks we can also find a strong speculative component. In strongly bullish phases, market operators are inclined to raise the price bar day by day. Do you think auction and PPA prices in Spain will go up again? Prior to this post-pandemic rally, the common sentiment was of a “bearish” market, it was believed that prices would continue to fall in part because of ever increasing  renewable capacity build out. Now we live in the opposite extreme. In my opinion neither one thing nor the other will happen, the market is always the result of the intersection of supply and demand and the extremes are not sustainable for anyone in the long term. For this reason, we are likely to see that in the medium-term prices will return to stabilize, but hardly below 40-50 €/MWh in real terms, a price at which most technologies are still competitive and investments for the energy transition profitable. Can too high prices end up damaging the market? It depends, obviously if we just look at the offer side, the higher the prices the better. However, we must not forget that for producers the “certainty factor” is just as important. In a capital-intensive business such as the one of renewables assets, in which the investor assesses the remuneration over the investment over a thirty-years horizon, here uncertainty is a decidedly negative factor. And in this sense, we are not only talking about the factors causing high market volatility, but also about regulatory decisions such as the last Real Decreto-ley of last September or the sudden changes in market design. For example, it has been clear for some time now that if the objective is to bring renewables to 60% or more of the national mix, a marginal price mechanism for spot markets is not sustainable and different solutions must be found. However, having postponed the discussion of this topic, we are now facing the consequence and these last-minute temporary solutions – such as the Real Decreto-ley 17/2021 – only create further uncertainty. Agreed, but for the demand, a too high market price situation can disincentivize long-term purchases. Is there a critical threshold? That limit exists and from the point of view of an industrial consumer, prices should remain between 50 and 60 euros (always expressed in real terms), an acceptable range and one that allows Spanish and European industry to remain competitive. Prices permanently above 60 euros could create problems, because in this way only two requirements of the energy trilemma are met, sustainability and security, but not the competitiveness. In a pure market situation, if we see prices permanently above 60 euros in the medium term, it means that something is not right. Spain is asking for the use of marginal price system to be overcome, but many EU countries are opposing. Wouldn’t a natural Ppa growth in the supply mix solve the problem on its own, without getting into that quagmire? Ppa growth can solve much of the problem. The point, however, is who benefits: if utilities sell green energy with long-term PPA contracts at 40 euros per MWh to industries, the cost advantage goes only to that type of consumer, but household consumers do not benefit from it. That’s why something else is needed. In your opinion, would any regulatory support be needed to facilitate the closing of PPAs? In the past, some have argued that specific regulations are needed to facilitate the conclusion of PPAs by end consumers, but the real bottleneck is not on the regulation, but on educating the market on the concept that the purchase of energy is also a long-term business. And part of the market has quickly understood this, given the growth rates of contracted volumes over the long term, in Spain as elsewhere in Europe, without any kind of external support. Coming back to the October auction, the offer has been much lower than in January. Why is that? There may be several reasons, I would focus on two. First, perhaps those who participated in the first auction were not satisfied with the price levels. Another explanation, which unfortunately is also familiar to the Italian market, is the delay in the permitting of the plants. Those who

Utilities’ share of Finnish PPA market increasing

Utilities’ share of Finnish PPA market increasing Get in touch In a longer interview with ICIS our partner Mikkel Kring comments on the current status on the Nordic PPA market “Innovative PPA structures with shorter tenors and increased risk sharing is prevailing, and IPPs are increasingly building confidence to start navigating more merchant schemes,” Read the full article here https://lnkd.in/eq8kwUJ2 Recent Post Financing Opportunities for Power-to-X in Denmark: Are the Fundamentals Established? Financing Opportunities for Power-to-X in Denmark: Are the Fundamentals Established? Get in touch Last week (04/06), PwC published a survey… Learn More 10 de junio de 2024 The energy transition puzzle has not a single solution The energy transition puzzle has not a single solution Get in touch ONE’s Partner Jakob Bendixen on the Danish GreenLab,… Learn More 1 de abril de 2024 The Silverlining: BESS and the Future of Renewables in Spain PPAs: why Italy only witnessed a few corporate cases Get in touch The Silverlining: BESS and the Future of Renewables… Learn More 14 de marzo de 2024 Cargar más

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