PPAs to play crucial role in Spanish renewable capacity growth

LONDON (ICIS)–Power purchase agreements (PPAs) are expected to play an integral part in bringing new Spanish renewable energy capacity online in coming years, driven by strong appetite among corporate offtakers for bilateral deals with renewable producers.

On Monday, asset management company Bruc Energy announced the acquisition of 20 solar PV projects in Spain from Spanish energy producer Opdenergy. The new 1GW of solar capacity is expected online in the first quarter of 2024, Bruc Energy told ICIS, and PPAs are an option for financing.

The company, which signed a 10-year PPA for a 110MW solar PV plant in southern Spain earlier this year, sees the country as a viable market for future PPAs because of its high solar irradiance and the number of lenders supporting the market.

“More offtakers and corporates are looking to renewable energy,” Bruc Energy added.

One of Spain’s biggest energy players, Naturgy, also sees a bright future for Spanish PPAs.

Last month the company announced plans to install an additional 3GW of renewable capacity in Spain by 2023. “This new capacity will mainly be under PPAs,” Naturgy told ICIS.

2021 PPA ANNOUNCEMENTS

PPAs are long-term contracts signed between a renewable generator and a utility or wholesale reseller for the supply of electricity. They offer both counterparties a reliable and predictable source of income, or cost, so are often used as a tool to hedge price risk.

Spain is among the countries to have announced the highest number of PPAs this year in Europe.

At least 20 have been signed in Spain so far this year, according to ICIS observations. Of these announcements, at least 13 are corporate PPAs (CPPAs). Most are for solar power.

Corporate PPAs are deals where the buyer uses the renewable power in its operations.

Last year, at least 23 PPAs were signed in Spain.

THE SPANISH PULL

Spain’s ambitious climate policies are also a key driver of the surge in PPA interest in the country.

Spain’s National Energy and Climate Plan (NECP) targets 39GW of solar PV capacity and 50GW of wind capacity – onshore and offshore combined – by 2030.

ICIS Long-Term Power Analytics forecasts Spanish solar PV capacity to increase from 14.3GW this year to 22.6GW in 2025, before growing to 44.2GW by 2030.

Wind farms are Spain’s leading power generation technology with almost 28GW currently installed, data from grid operator REE showed. The renewable source is expected to reach 32.9GW in 2025 and 45.7GW by the end of the decade, according to ICIS analyst models.

ICIS anticipates that renewable sources will meet 57% of Spain’s total power demand in 2025, rising to 87% by 2030.

Subsidy-free renewable capacity growth in Spain is also a factor. Around 3GW of renewable capacity was tendered earlier this year , and Spain plans to hold a total of 20GW of renewable capacity auctions by 2025.

ICIS expects significant subsidy-free renewable expansion in order to meet the 2030 NECP target.