European PPA prices rise 2.3% in July, Spain falls 3.9%

The European market for long-term power purchase agreements (PPAs) showed divergent trends in July, shaped by energy market volatility, a rebound in gas prices, and varying levels of renewable penetration across markets. According to the latest index from Swiss consultancy Pexapark, the Euro Composite rose 2.3% to €45/MWh, although trends varied between countries.

Great Britain recorded the largest monthly increase, at 5.8%, followed by Italy at 4.3%. In both markets, the increase was supported by stronger forward electricity prices, as gas markets continued to incorporate risk premiums associated with geopolitical instability.

At the other end of the scale were several markets with high renewable penetration. PPA prices fell 6.3% in the Nordic countries, 3.9% in Spain, and 2.9% in Portugal. The trend largely reflects the impact that high renewable generation can have on long-term electricity price expectations and, consequently, the value of renewable supply contracts.

In the Nordic countries, the decline was mainly linked to a recalibration of PPA Fair Values in Denmark, incorporating an update to the Market Price of Risk and new forward capture price curves. High renewable generation and healthy hydropower reserve levels also continued to weigh on long-term price expectations.

Despite price volatility, contractual activity remained high. Twenty-four PPAs were publicly announced in Europe during July, representing approximately 1.1 GW of contracted capacity.

Corporate buyers accounted for 21 of these agreements, representing around 770 MW of disclosed contracted capacity, while utilities signed three contracts totaling about 620 MW.

The largest transaction of the month was a 332 MW offshore wind PPA between Ørsted and a consortium of investors for the Gode Wind 1 project in Germany, coinciding with the facility’s exit from the support scheme under which it had operated.

Solar PV remained the dominant technology, accounting for approximately one-third of disclosed contracted capacity. Mixed-technology and onshore wind PPAs represented about one-quarter of the announced capacity each.

Contractual structures

The storage market also showed strong activity in July. Pexapark counted nine BESS agreements announced in Europe, representing about 865 MW and 3.1 GWh of disclosed contracted capacity.

Tolling agreements accounted for four transactions and represented the majority of the capacity. They included two agreements in Italy signed by Zelestra with EnBW, for 300 MW, and Axpo, for 207 MW. A 100 MW tolling agreement was also announced in Great Britain, along with another 55 MW portfolio agreement in Spain.

Revenue swap structures were also announced in Spain and Hungary, while Germany, Poland, and Denmark recorded merchant revenue optimization agreements with revenue-sharing arrangements.

The diversification of these structures shows that the BESS market is moving toward more sophisticated contractual models. Tolling agreements provide greater revenue visibility for utility-scale projects, while revenue swaps and merchant revenue-sharing models allow owners with greater risk tolerance to retain partial exposure to potential upside in electricity markets.

Volatility was driven by developments in the Middle East conflict. Periods of easing tensions and discussions over possible ceasefires temporarily pushed gas prices lower, while renewed military escalations and concerns over potential disruptions to LNG supplies through the Strait of Hormuz quickly reversed the trend.

Heat waves in Europe also increased electricity demand for cooling and limited the availability of some French nuclear power plants because of high river temperatures. Drought in Central Europe also lowered Rhine water levels, creating uncertainty over coal transportation.

From pv magazine España