The overlooked quick win for European renewables

Despite huge growth in the rollout of renewable energy, you will likely have heard the sector calling for grid investment and faster permitting to ensure the full potential is unlocked. Happily, a lot of work is being done to address these needs: accelerated permitting areas, caps on maximum permitting periods, coordinated cross border grid planning and many others.

There is certainly more to do, but it is also critical that the electricity from the projects that connect to these improved grid systems and progress at a rapid pace through these streamlined permitting processes has a route to market. The renewable sector faces a triple challenge of grids, permitting and supporting multiple routes to market.

The corporate power purchase agreement (PPA) market is a crucial path, and these agreements can underpin the financing of the renewable capacity Europe is looking to keep adding in record volumes. According to data from the RE-Source Platform, 2023 was a record year for PPAs in the European Union with 7.8GW of contracts signed. But there’s one quick win that could move activity in Europe up another gear.

Renewable energy power purchase agreements, credit where it’s due

Guarantees of origin (GOs) are certificates that authenticate that a unit of electricity was generated from a specific renewable energy source. They provide validity to final users regarding the origin of the clean power they paid for, they prevent any double counting, and they can also be traded.

For companies with high environmental, social and governance (ESG) standards, being able to demonstrate the provenance of their renewable power beyond doubt is a huge benefit. Without that, there are reputational risks right across the power system.

The European GOs system mostly works well, but it can be inefficient from one registry to the next and has differing levels of complexity.

That means some businesses looking to sign a corporate PPA may choose to focus on projects in specific countries. Smaller businesses with less experience of complex energy buying might just walk away from the PPA market entirely. That is a missed opportunity.

The Association of Issuing Bodies (AIB) platform is a crucial part of the puzzle and, happily, it’s already in place. EU member states should join the AIB and implement a standardised, EU-wide registration process for GOs. This would cut project risk, support investment and drive Europe’s wider energy security and competitiveness objectives.

Europe’s uneven landscape for corporate power purchase agreements

In some markets, such as Norway, electricity is generated and the following Monday the end user has their certificates. In less efficient markets, this can take six months, and the electricity supplier could be inserted into the process, putting further distance between the authenticated clean power and the PPA’s end user.

Lightsource bp is an expert in power contracting, and we have been able to execute PPAs in markets such as Poland and Greece, where the systems could be more efficient. It can be done, but it requires both parties to be experienced and motivated to work together to find solutions in those markets.

Setting corporate power purchase agreements up for long-term success

It is also important to consider what corporate PPA buyers are going to want now and in the future. Power procurement is more likely to happen across borders than in the past. A valid audit trail can help ensure any impacts on reputation are positive.

With more standardisation of processes across Europe, larger challenges around GOs could be addressed so that a more robust system, with clear price formation and hourly issuance, emerges.

That’s the long-term goal. The prize would be transparent renewable energy procurement, a dynamic GOs market and added investment certainty. Because of that certainty, more projects can be deployed to support the growing demand for clean power and heightened energy security. That’s a triple win all around.

Meet our power marketing team at Re-Source 2024 in Amsterdam.

Colin Spain

Head of Origination and Strategic Partnerships, EMEA and APAC