The latest buzzword – PPAs

Soon to be launched: Montel Weekly podcast

The Montel energy podcast – market insights from people in the know. In this week’s episode, we take a close look at the latest buzzword – PPAs. 

Guests: 

• Olav Vilnes, Nordic news editor, 
• Nora Kamprath Buli, Team Leader Germany,
• Andres Cala, Editor Iberia. 

Transcript

Richard Sverrisson, Editor-in-Chief Europe, Montel: 0:03

I had like to warmly welcome you to the first Montel Weekly Energy podcast. For those of you who don't know us, we're the leading energy wire in Europe covering all the main stories in in electricity, gas, carbon, and coal. We are the go-to site for energy news. My name's uh, Richard Sen. I'm the news editor in charge of our European operations, and my co-host is Anna Veka.

Anna Veka: 0:24

Hello, I am Anna Veka. I'm an experienced broadcaster and podcast producer. Here behind all the wires and cables, making sure that everything works.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 0:33

Perfect. Perfect. Uh, very important part of the job here. I think, um, every week we plan to bring you a fresh episode, um, free from the constraints of, of the text, uh, which, uh, you know, of our stories online. So we, it's more of a free flowing, uh, conversational look at the, the, the main elements in, in what's happening in in European energy. And, uh, we also plan to bring the odd special or bonus editions from conferences or interviews that, uh, that we do on our travels. Uh, we meet all the key people in the European energy markets, uh, on a, on a weekly basis almost. So I, we hope to keep you up to date on, on the main events in, in Europe, um, European energy and even global energy. Because we've opened an office office in Sydney now, and uh, as I'm sure you're aware,

Anna Veka: 1:20

breaking news.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 1:22

Absolutely. So, um, please feel free to give us feedback. Email us. We're on Twitter, so you know, please grill us there.

Anna Veka: 1:29

Be nice. Come on. I think we can absolutely promise you that we'll do our best to be energized as this is, um, news Energy podcast. And we will, uh, we'll have guests from, um, from our bureaus around Europe. Probably Sydney soon, asked them to set up a studio

Richard Sverrisson, Editor-in-Chief Europe, Montel: 1:44

overlooking, uh, Sydney Opera House or wherever. I'm not quite sure where, but, uh, yeah, definitely. We'll be in touch with, with Nathan, our man in Sydney. In this episode, uh, we bring you the pod from our London office. Now, uh, as you are aware, Anna, when we were setting up, there's been quite a lot of building work, uh, drilling and et cetera, hammering next door. So hopefully they're on their tea break. We're in London. But, uh, we're not gonna talk to you today about Brexit, I promise you, um, or anything Brexit related. It'll be a b free zone today.

Anna Veka: 2:13

Yes. Everyone is tired of Brexit talk already, so let's leave it behind.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 2:17

Absolutely. So instead, we'll focus on an area that's currently hot on everyone's lips. Power purchase agreements or PPAs, they may not sound that sexy, but they're certainly gaining an importance across Europe from from Spain to, to Finland, Norway, down to Poland. So I think it's a, it's a very important development, um, an area that, uh, that people are talking about. When I was in, in, in essence for an E world, one of Europe's, if not the biggest energy trade fair in Europe, uh, energy related. PPAs were a very, very hot topic. Um, certainly much discussed at the Monte Bar and and beyond. Yeah.

Anna Veka: 2:55

How was E World?

Richard Sverrisson, Editor-in-Chief Europe, Montel: 2:55

Oh, it was great. Yeah. Excellent. Very busy. Three days. Uh, stand happy. Stand happy. Stand happy, happy people at, happy Stand.

Anna Veka: 3:02

That's good.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 3:04

Have you been there or no?

Anna Veka: 3:05

Not, not this time, not this year, but I, um, I hope to accompany the crew next year. Hopefully.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 3:11

Yeah. Perfectly we'll. Maybe we'll even record live from, uh, from Essen.

Anna Veka: 3:15

That will be awesome. A lot of technical work, work behind

Richard Sverrisson, Editor-in-Chief Europe, Montel: 3:19

keeping out the hubbub and Yeah. And also, yeah, absolutely. Yes.

Anna Veka: 3:23

As long as there's no construction works in ASIN next to the fat, that's fine.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 3:27

Anyway, um, I thought, um, we discussed maybe going some basics about PPAs. Uh. Before we get into the nitty gritty, and, and I'd introduce you to some of our, uh, our key montel um, editors, PPAs Anna. Um, is this an area you are fam familiar with?

Anna Veka: 3:42

Yes, I am. However, I do not have the expertise, so I hope for you to bring the knowledge to the table and also our guest. I do have the blurry idea of, of what it is and that it is actually gaining so much more interest right now. Mm. Uh, because of the, you know. The companies wanting to focus on a hundred percent green energy and also that Europe is lagging behind. Is that correct? After us?

Richard Sverrisson, Editor-in-Chief Europe, Montel: 4:06

Absolutely. I mean, they've been, uh, a major part of the energy landscape in the United States for a very long time, and, and now Europe, as you say, is catching up. Um, it's a lot to do with the fact that subsidies are coming to an end. The feed in tariffs that we see across Europe are gradually being phased out. The cost of building wind and solar is becoming, um, much, much cheaper. So the costs have dramatically fallen since, you know, just two years ago. And this means that they're cost competitive with. With new gas plants or even cheaper than new gas plants. So building an onshore wind or an offshore wind farm is probably now cheaper than building a, uh, gas plant. So this means, uh. That many companies are looking at ways to finance some of these projects, and a way of doing that is through PPAs. You know, it's, it's a secure way, um, for, for developers and their bankers. It's a secure income and for companies. Buying the power, it it, it guarantees them a set price. So they, they don't have the risk of going to the wholesale market and, um, you know, reduces their risk exposure to the wholesale market or certain price, price spikes or, or whatever.

Anna Veka: 5:20

Because we are talking about very, very long term agreements. Right? This is five to 20 years. The PPA

Richard Sverrisson, Editor-in-Chief Europe, Montel: 5:24

absolutely. It could be some from three to five years, or it could be 15 to 20, but you need to secure the, the, the finances. Um, and I think, um. And who has the visibility? No one, no one has a crystal ball. So we can't say what the, the power price is gonna be next week, let alone in, in, in 2035. So I think it's, um, you know, it's, it's a way of guaranteeing that income for the developers they want that, not just the developers, but of course the banks and the peoples putting up the money in the first place. And I think a key element, which you touched on Anna, was uh, companies and that companies want to be seen to be sustainable. They want to be seen to be buying green power. That includes big tech companies such as, uh, apple, Google, I. Facebook, Amazon, et cetera, but also smaller companies, um, and big industrial giants as we'll. Probably hear, hear, hear a bit more about later.

Anna Veka: 6:18

We already hear about Norway striking deals.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 6:20

Exactly. So, Norway's a Norway and the Nordic region, uh, is, is is booming in, in, in. In PPAs We'll, we'll hear from my colleague Ola in Oslo in a couple of minutes. Uh, and he'll give us more details. But I think, um, a big development there is the, the utilities signing off with the developers and, and also the big industrials are getting involved, like North Kero, big aluminum producers like Alcoa as well. Um, and they're all, they're all very active in this field.

Anna Veka: 6:48

I'm not surprised that this is happening in Norway. Big time in the

Richard Sverrisson, Editor-in-Chief Europe, Montel: 6:50

Nordic region. You've have, you've have a history of, of hydropower production. So Norway is, you know, 90, 95%, um, covered by hydropower. So I think, uh, well at least it's electricity consumption is, um, um, but yes, it's becoming, as I mentioned, as costs are coming down, uh, for, for renewables and subsidies are ending then, you know, um, building new, new wind and renewables is becoming profitable. As long as you can secure that financing.

Anna Veka: 7:19

How do we do that?

Richard Sverrisson, Editor-in-Chief Europe, Montel: 7:20

Well then you talk to a bank and you talk to someone who can take the power and who can provide that guarantee for, for, for, for the price. Um, I don't think that's an easy thing. I think I. PPAs, uh, they may sound simple, but then they are very, very complex entities. Um, and I think there are probably as many different types of PPAs as there are companies out there. So I think every, every developer, every company wants a different type. Um, I think broadly speaking, you could divide them into two. You could say they're corporate PPAs, which are directed at companies where the companies want to. To get green energy. Um, they can do that in a number of ways. They can have a direct cable to the wind farm. So that's Private wire. Private wire, exactly. Or they, they can buy the certificates, um, the green certificates as you like, the guarantees of origin. So the, the certificate that, you know, basically guarantees that the powers come as, as it says on the tin. So it's a guarantees that the, the powers come from, from a sustainable source, which is wind or, or solar.

Anna Veka: 8:26

And it seems like a very, very, um, attractive environment for, for getting involved in this. Uh, we have the, the targets in the European Union for the re renewables being revised. Uh, we have a lot of noise, a lot of buzz about, you know, being green. There's of course the financing parts, so the green bunking.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 8:47

Absolutely. I, I think that's a very crucial element there. That is each European country has to combine to meet a 32% target. Um, there are no individual targets set, but it's, it's a combined EU target. And that's quite challenging to, to go from 20% by 2020? 20. Yeah.

Anna Veka: 9:07

Next year. Next year.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 9:08

And to 32% by 2030, which is also, which is up by 5%. Originally the commission only wanted 27%, but, um, pressure within Parliament and, um, by meps pushed that up to 32% and to reach those targets, it's very, it's, it's challenging and, uh. I think we'll see a lot more renewables build going forward. Um, and as countries like Germany exit from nuclear power and coal, um, the UK has almost, uh, coal generation, coal fired power generations almost ended here. Uh, very, very minimal. Uh, coal, they're shutting down left, right and center. These coal fire plants. And um, there are places such as your home country, Anna, which is obviously Poland. Poland, yes. Which has faces a huge challenge if it's. If we see the continued rise in carbon prices and, uh, and the dependence on foreign coal, then I think, um, Poland, you know, uh, faces some tough choices. And I think, you know, at the moment it's not building a lot of renewables, but that, that could change.

Anna Veka: 10:16

Yeah, that's a lot of discussion, especially after COP 24 and Cata Vita very, very call oriented, so that's interesting.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 10:24

Absolutely. I know that, uh, that the. Current, uh, regime in, in pun is not so pro renewables, but I think, you know, but who knows? Uh, once the, the, it starts, the costs start mounting. Um, that could, that may be, they may be forced to change. But I think, you know, for Poland, something like signing PPAs is, is probably also a, a way of securing that finance, um, and developing renewables in a secure and fairly cheap and efficient manner. So I, I'm surely that, and that, that would be a way for, for Poland and other eastern European countries that are reliable and fossil fuels to, to proceed down that route.

Anna Veka: 11:01

I don't know if there is any, uh, recent data. Last data I have from, um, August, 2018 about the record being broken when it comes to the PPAs was 7.2 gigawatts, right? Um, signed in the, the PPAs, which was six months, and we already had the huge jump. When we compare it to 2017, the entire year that there was, uh, what, five, 5.4 gigawatts

Richard Sverrisson, Editor-in-Chief Europe, Montel: 11:25

according to management consulting, who I talked to, um, a couple of weeks ago. They say that, um, it's certainly in, in Norway and Sweden, uh, corporate PPAs rose to 5.5 tarot hours last year, which is more than. Doubling from the previous year, and according to other figures, the reports out there we saw, you know, 7.2 gigawatts being signed. Um. Across Europe, not just in in the Nordics. Isolate three areas in particular. Three regions in particular. And, and, and the first one being, being Norway in the Nordics. The second being Spain because Spain and Iberia certainly have seen huge growth in the last few months. Uh, there was one just signed, um, uh, 700 megawatt deal signed last week. Yeah, they're involved. My Spanish is not too perfect, better than my Polish, I think. And, and Germany, because Germany has a huge amount of installed renewables. Um, but it wants to expand even further. And it's, as we mentioned in the opening, opening, uh, parts of this pod, we, we, the feed in tariffs of the subsidies are coming to an end and they look, their developers are needing to find other ways of, of, of getting support or financing these deals. So PPAs are certainly becoming very attractive in, in Germany as well. Maybe it's time to call our first guest, Anna? Yes,

Anna Veka: 12:53

let's do that. Who are we gonna speak to?

Richard Sverrisson, Editor-in-Chief Europe, Montel: 12:54

We're gonna speak to Olav Vilnes. He's the Nordic news editor based in Oslo. He's the man with all the inside knowledge. Hello, Olav. How's life in Oslo? Is it, uh, gray and cloudy or sunny or

Olav Vilnes, Nordic news editor: 13:06

It's very gray and cloud. Go outside office and not, no reason to go. Okay. Watch the

Richard Sverrisson, Editor-in-Chief Europe, Montel: 13:16

screen. Yeah. Good for screen time. Um, well, thank you for joining us all. Love. We, we, we, the topic today is PPAs, um, and, uh, I wanted to use some of your depth and breadth of knowledge about the Nordic region. Um, could you tell us a little bit about, um, developments of PPAs in, in Norway and Sweden? How, how is, how, what's the market looking like?

Olav Vilnes, Nordic news editor: 13:39

Growing. I mean, this is not a new market such the industrial have PPA to their consumption for, for decades. But, um, all winds coming up also imp and you. Deal.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 14:15

Okay. Wow. But why, what solar in the Nordic region. It's not known for its sunny weather

Olav Vilnes, Nordic news editor: 14:22

today. It very strange, but.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 14:50

Certainly today, maybe, um, yeah, yeah. But Ola, why, why is this happening now? In these, in, in, in what, what, what's so special about, you know, 2018 or 19? Um,

Olav Vilnes, Nordic news editor: 15:03

I think it started a couple of years ago actually then saw some deals coming up. New plans. Norway 2020 will longer receive such ep. Sweden will continue. But if look the market prices that value of need something out, some other things to provide investment security say, and then these are getting, uh.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 15:55

But the Nordics are, you know, they have an abundance of renewables. Why? Why build wind? And um, why sign PPAs?

Olav Vilnes, Nordic news editor: 16:04

Wind, but you look at the history, the Nordic, I mean, if you, if you have the, I mean the D. The D started to wind the eighties because they wanted to get rid of oil and gas, have hydropower, Sweden, a lot of nuclear power. Get rid of. The weather. System as well. So I think there's, and also the issue of using electricity, new sectors like transport, um, even in the petroleum sector instead of local gas. So I think need wind power, um, even if.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 17:06

Perfect. I mean, would you expect this development then to continue as well? All of, I mean, it's not gonna come suddenly come to a halt, is it? I mean it's this, these kind of PPAs are gonna continue to being signed, wouldn't you say?

Olav Vilnes, Nordic news editor: 17:18

Probably not coming to a halt. I think it'll increase probably for the reason I mentioned with all the, um, with all the. Subsidies just shows.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 18:05

So, so the tech companies are the big off takers, if you like, who, who?

Olav Vilnes, Nordic news editor: 18:15

You mentioned North as well. Yeah, so, so there are two, two different types of, you could say you have the IP giants, you have the, uh, as I mentioned in Denmark, but then you have the industrial traditional used sign up to long power purchase agreements from hydropower, like. Sweden has signed up to vote for long term to secure enough supplies aluminum in, in Norway.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 19:10

And how about utilities? Are they, are they also involved in this? I mean, we, you know, um, could you tell us, tell us something about the, the companies that are then sort of in the middle, or if you like, or are, you know, are, are, are actively signing with the other companies?

Olav Vilnes, Nordic news editor: 19:41

They've done for many years, got same. It sort of locks in their earnings for many years in the future and gives them predictability. Um, and they, so they're very active. And then you have, of course, as well have companies who used to come in there and. Companies actually go in there. Market, market value of.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 20:24

Sure. I mean, it gives them a guaranteed kind of earning or some guaranteed revenue or, but is there, do you think there's any limits on the amount of risk that these companies can take on board? I mean, if they are, you know, they're guaranteeing a price from some of the wind developers. If we go into several hundred megawatts, I mean, that's a huge amount of, of price and volume risk. I mean, surely this, this, this, they can't continue to do that, do you think or.

Olav Vilnes, Nordic news editor: 20:55

I. But yeah. Absolutely perfect.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 21:26

Ola, thank you very much for your time and telling us all about, um, the developments in, in, uh, in Oslo and, and in, uh, extensively across, uh, the Nordic region. So thank you for your time. That was Ola Ness reporting from, um, from Oslo.

Anna Veka: 21:40

Thank you, Ola. So we have the Nordics leading

Richard Sverrisson, Editor-in-Chief Europe, Montel: 21:44

as ever, or as they, they, they like to think they're the leading, uh, region for this,

Anna Veka: 21:48

for everything. Happiest countries in the world and stuff.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 21:51

Absolutely. They come very high on that and, and certainly on, on any renewables, uh, um, surveys. I think as well, I.

Anna Veka: 21:57

This is this closeness to nature that they promote.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 22:06

But I think Anna, I, I think, you know, it's, it, the Nordic development is, is leading, I mean, it's leading the way in a lot of the power market stuff. It, you know, it's one of the most liquid, well-developed markets, one of the first ones. Um, the companies that are active there are active across Europe. Um. They're, they're sort of standard bearers for renewables and certainly for, for, for hydropower and for for traded markets. Um, so I think that what's happening there is, is, is a bit of a, something that we can expect in other parts of, of, of Europe and even the world. Um, certainly these act, StarCraft is active globally.

Anna Veka: 22:40

Speaking of seeing it somewhere else, where should we go now?

Richard Sverrisson, Editor-in-Chief Europe, Montel: 22:43

I think let's go. Back to Oslo, Nora Bui, who's the team leader for our Germany desk. So she will tell us all about, um, developments in Germany. So let's, let's get Nora on the line.

Anna Veka: 22:56

Very good to hear another female voice. Hello.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 22:59

Hello Nora. How are you? I'm good. Thanks for finding the time to speak to us, Nora. Um, we, the topic today is PPAs and, and Germany. What can you tell us about what's happening in Germany with, with power purchase agreements?

Nora Kamprath Buli, Team Leader Germany: 23:14

Well, compared to other countries, I'm gonna say not, not quite as much yet, uh, the, uh, the uptake, uh, I would say. Doesn't mean people aren't looking at them. There's definitely sort of buzz going around the industry, uh, where, where people are looking at the opportunities there are in Germany as well. Mm-hmm. Um, I mean, I run an annual survey of, uh, the companies active marketing scheme for renewables, where you sell green output. From onto the market. So you provide a service for them. Mm-hmm. And most of those companies have said they're looking to already offering PPA structure to their clients, but mostly I think where they, uh, see any opportunities, uh, for units that, uh, that are turning 20 years over the, which means they longer.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 24:20

So do you expect it then to sort of kick off in earnest from like 2020 when the feeding tariffs end?

Nora Kamprath Buli, Team Leader Germany: 24:27

Probably see more deals for those kind of, uh, um, winds. Mostly already this year. We saw first one, um, last year by, uh, by Norway Markets, uh, who are the biggest direct market in Germany and are now, I guess, taking a lead on the. They find a deal with three wind farms for 46 megawatts, and those are coming, um, outta the subsidy scheme from 2020. Um, and what you see with those, um, um, contractors, they're fairly short. They're, those contracts were three to five years. Others are talking about maybe only one, one year or two. Continue running them, given they're already Okay. So these

Richard Sverrisson, Editor-in-Chief Europe, Montel: 25:20

are new PPAs, but for older units, and you mentioned Starr markets. Are any other companies very active in, in this, in this sector?

Nora Kamprath Buli, Team Leader Germany: 25:29

Most of the companies, uh, that I speak to, uh, said they're doing this where companies in Germany are active or maybe more in other markets. We have, uh, seen now that re, which is a German green market. Uh, they're very active in Spain, Portugal today office. There. Planning. Uh, another PPA that we've heard of last year in Germany was actually some green energy, but that was, I think more on a smaller scale and for their end customers, uh, where they, uh, agreed from 2021 again to take on production from. Offer these sort of structures where either they become the purchaser of the, uh, of the power and then sell it on, which is basically what stock did they sell the power onto Mercedes Fence.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 26:33

Okay.

Nora Kamprath Buli, Team Leader Germany: 26:33

Uh, and um, yeah, so it's a very familiar names as well.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 26:37

Yeah.

Nora Kamprath Buli, Team Leader Germany: 26:39

Yes, I think. Corporate, some potential buyers of, uh, green of those green capacities or green output also in Germany. But obviously what Germany lacks is big players see markets international. It. Someone like Mercedes, they. Electric.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 27:30

But how about new deals? Can you see? Are there, are there new deals in the offering as well? As, as, uh, I mean, for new capacity, I mean, rather than new deals, it's all quite new, the deals, but, um, so are there new offshore or onshore wind or solar? Are, are these being built on the back of PPAs is something that you can. Do you? Not

Nora Kamprath Buli, Team Leader Germany: 27:50

yet, but I think we, we are coming to a point where, where that will become, uh, a more viable option. For example, last week, uh, we saw an announcement from German, uh, utility that they, uh, are looking to build 175 megawatt, uh, solar in Germany. Fairly, fairly still, if you like, for, for producers. Uh, but those new units that have to finance themselves through an auction, uh, for solar, the prices in the last, that was in Germany. Okay. And when you compare that to the. You can, that it's starting to link, that you do not necessarily require subsidy to make, to make that investment. And although w didn't, so current wholesale

Richard Sverrisson, Editor-in-Chief Europe, Montel: 28:55

prices, sorry, Nora, they're about, you know, yeah. On or around there. Okay. So that makes, makes a lot of economic sense for these big companies then,

Nora Kamprath Buli, Team Leader Germany: 29:02

um, more expense than before. Building park come down and are closing in on, on wholesale prices. Uh, the leap into a non-subsidized, a daunting project. Developers, we wind, it's a slightly different picture because there you can still get much, uh, subsidies.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 29:35

Perfect. I mean, Nora, you are also the Ewell trade fair, uh, recently. Mm-hmm. Was there much of a buzz around PPAs there?

Nora Kamprath Buli, Team Leader Germany: 29:45

Oh, absolutely. There wasn't a single discussion I had with people where it wasn't brought up. Uh, and it's hard to tell if, if you mentioned it first, or they did, but it, it's definitely something as Germany is looking to grow. You, everybody's looking at ways to, to make that happen. And potentially we could see, uh, as you suggested that some new assets will be built outside, um, of government. Um, where you just say, I'm taking the risk building, and then obviously would want that. Contract length compared to 15 or 20 years, sometimes another country.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 30:39

But watch this space. A Nora, thank you very much. Um, I believe

Nora Kamprath Buli, Team Leader Germany: 30:42

so.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 30:43

Thank you. That was Nora Kali, team leader Germany, uh, reporting from from Oslo. Thank you, Nora.

Anna Veka: 30:53

Well, you said at the beginning that we're not gonna. Talk about something that sounds sexy, but it apparently PPAs are very sexy.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 31:00

They're being talked about at the Monte Bar now. Then I think certainly, uh, certainly that's the way, you know

Anna Veka: 31:04

everyone's talking about them.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 31:06

Where should we go now? I thought we could now head off to, to Madrid and here directly from our, our bureau chief there, Andres Cala. He's certainly been looking very closely at PPAs. Let's get him on the line. S.

Andres Cala, Editor Iberia: 31:21

Yep. Happy to talk ppa.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 31:24

Oh, perfect. Under, so we've got the right person on the line here. Um, yeah,

Andres Cala, Editor Iberia: 31:28

exactly.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 31:29

Maybe you can talk us a little bit about what's happening on the, in, in the PPA sector in, in, in, in Iberia, Andes, so Portugal as well.

Andres Cala, Editor Iberia: 31:38

Knew this was gonna happen at some point. Um, uh, renewable, a huge renewable expansion both in Portugal and Spain. We just didn't know how it was gonna happen. Uh, we weren't. And course p matter of speaking. A lot of the, well, the, the firewall so to speak, that they were, um, building a lot of these, uh, this additional capacity, uh, PPA Spain markets, uh, um, because market pretty much all hours between Portugal and Spain. Um. It doesn't have, has, uh, a real price reference, long term price reference forward contracts, uh, only reach, uh, seven, uh, seven year maturity. Uh, and even then, they were only introduced this year. So for the last five years, we only had one. Certain, there still a lot of uncertainty on what I prices will look like, uh, over the five years, 10 years, 15 or 20 years. Um, but because, precisely because that reason and because. Renewable capacity ppa, uh, started, uh, hitting, getting off the ground. It started about two years ago. Very, very, as you can expect. Uh, then last year we had quite a significant amount, and this year we're certainly hitting off the, the, the year running. At this point we have 2.4 Ts, I'm sorry, gigawatts of, uh, this, this. Almost one gig, uh, uh, compared to 1.4, uh, total before that. Um, and it's coming, um, mostly as solar. There are some wind also, uh, some, some minor wind developments. Um, part of the reason that would, uh, explain that because. Uh, it has been more difficult to find proper fine financing for, whereas wind power, I'm sorry, solar power portable tag power specifically, uh, is a lot cheaper. Uh, and you can install rather easily. And there are, this is certainly the land for, as we know, IBER has the sun. Absolutely,

Richard Sverrisson, Editor-in-Chief Europe, Montel: 34:36

certainly, certainly sunny and, uh, sunny in Spain. Um, it's, it's, um, there's not much rain that falls on the plane, so we are here. But, uh, so, uh, did, do you expect, um, this, this. Development to continue Andres, uh, this year or next.

Andres Cala, Editor Iberia: 34:51

I think it must, I don't think we really have a lot of a choice in that, um, this year, next year and going forward. The reason why is because we have, because of the renewable capacity that has already been mandated. So the government, uh, already auction, and this was in previous three years about, uh, let's see, eight and. The, the remainder was, uh, solar for the photovoltaic power. Um, and obviously this subsidized, it's not subsidized in the usual fashion, and I'd say only comparison to itself. The tenders in Iberia used to be very cumbersome. Subsidies when needed. Make sure off the ground. Nowadays the government reforms the tender and you only get subsidies if and when the power prices are below well floor. Is never really reached. So it only serves Mo most of the time as a psychological really, uh, um, yeah. Floor for banks. Okay.'cause a lot of this has, has been over, I mean, a lot of the bottlenecks, there's a lot of interest in building, there's a lot of money to. But it's still gonna offer a premium compared to other European power markets. So

Richard Sverrisson, Editor-in-Chief Europe, Montel: 36:52

a very good revenue stream for some companies. Could you tell us a little bit about the companies that are involved? I mean, we've, we've heard from, um, from the Nordic region in Germany that are companies like StarCraft, Al Bewa, others. Um, what about in Spain? Who are the, the companies that are, that are most active there? Andres.

Andres Cala, Editor Iberia: 37:10

So specific names. Um, uh, the biggest player by far is a company. It's a small utility, uh, retailer, big rate retailer called, it's Barcelona based, actually, Barona, which is beside Barcelona. Um. And it's like other retailers, uh, that have, that have sprouted in the last couple years. They pretty much sell, uh, to end users based on their renewable profile. So this company has signed already, uh, the most recent one was this month, one point, uh, almost 1.4 gigawatt of. There, uh, the, the other, and there, there was also another recent PPA involving one of the biggest, uh, industrial players. Oh, well, uh, uh, a company created from all the industrial players just to, uh, buy power for them. It's called for this trading house and for. The number of. Which means, of course, that no longer need. Solar power, wind power? No, they're the generators, like stock, like uh, in the case, an developer who works a lot with. Uh, the German, uh, uh, insurance, uh, uh, uh, company that has a cap, uh, a capital, uh, market unit. And they're the ones who are actually paying to have another Irish company build the solar farms in Iberia. And then comes s. Uh, and they're, and they're buying this, uh, the supply from, from these new solar installations and their base load and at a fixed price too. Uh, they're guaranteed supply and price, um, which means that they have, they must. There is a clear price reference being developed in Iberia, something that has never happened. Hmm. So

Richard Sverrisson, Editor-in-Chief Europe, Montel: 39:45

it's positive for the wider wholesale market because you're getting some price liquidity out on the curve for, for, for the general market participants. So it's, it's, uh, it's a win-win situation if you like, then ands.

Andres Cala, Editor Iberia: 40:01

We've, and actually it started late last year, but we're seeing more liquidity. Liquidity in the longer dated contracts. The the COW 2021 Cow 2022, in fact. Uh, and the bizarre trade bizarre for Spain anyway, because historically. This, even if the contract contract were offered, you would never see any liquidity whatsoever. Even, even now. We're starting more liquidity and it's, it's related and it's thanks to these ppa uh, uh, well price, uh, benchmarking that, that, that's happening now and the fact that yeah, we're getting proper financing, uh, to get, uh, a lot of these deals off the ground.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 40:50

Andres, thank you very much for your time. So, Andres Kala, our bureau chief in Madrid. Well, I think we've heard quite a, quite a wide variety of, of different, um. Uh, different types of PPAs and uh, um, a lot of familiar companies cropping up here all the time.

Anna Veka: 41:05

Mercedes and

Richard Sverrisson, Editor-in-Chief Europe, Montel: 41:06

Alliance, the insurer, you know, and, um, start craft seems to come up quite a lot. So they're obviously very active across, across the region.

Anna Veka: 41:14

So I think we did the knowhow of PPAs,

Richard Sverrisson, Editor-in-Chief Europe, Montel: 41:17

I think we did today.

Anna Veka: 41:18

Thanks to our guests from, uh, different bureaus absolutely here in Europe.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 41:23

That's it for this week's edition of the Weekly Podcast. Hope you enjoyed it. This episode was brought to you by

Anna Veka: 41:30

veka and

Richard Sverrisson, Editor-in-Chief Europe, Montel: 41:31

Anne Richardson.

Anna Veka: 41:33

Thank you to our guests. To all of Nora and Andres. For more energy news, check out website, subscribe and follow us on Twitter at news. Be sure to tune in next week. Bye

Richard Sverrisson, Editor-in-Chief Europe, Montel: 41:44

bye.