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Plugged In: the energy news podcast
Coming from the heart of the Montel newsroom, Editor-in-Chief, Snjolfur Richard Sverrisson and his team of journalists explore the news headlines in the energy sector, bringing you in depth analysis of the industry’s leading stories each week.
Richard speaks to experts, analysts, regulators, and senior business leaders to the examine not just the what, but the why behind the decisions directing the markets and shaping the global transition to a green economy.
New episodes are available every Friday.
Plugged In: the energy news podcast
Will standardised PPAs revive a stagnating market?
Long-term renewable power purchase agreements (PPAs) have been in steady decline across parts of Europe, thanks to low wholesale prices and a volatile market. Yet some short-term standardised PPA products have seen encouraging uptake — could those be a blueprint to restart the broader market?
Richard speaks with German trading company FlexPower about pricing dynamics, contract structure and risk allocation. Listen to a wider discussion on the key factors behind the success of recent moves to standardise PPAs and the practical and cultural barriers that remain.
Host: Richard Sverrisson - Editor-in-Chief, Montel News
Contributor: Kelly Paul - Reporter, Montel News
Guest: Amani Joas - Managing Director, FlexPower
Editors: Oscar Birk
Producer: Sarah Knowles
Hello listeners, and welcome to Plugged In - The Energy News podcast from Montel, where we bring you the latest news issues and changes happening in the energy sector. The market for long-term renewable power purchase agreements, or PPAs has been stagnant and a decline in many parts of Europe for several reasons, including volatile and often very low wholesale prices. But also the level of complexity of many deals. One option, flouted by some, has been a move to standardize PPAs, a measure previously seen as an uphill struggle. But we are starting to see the success of some short-term standardized PPA products. Could this be the start of something big for renewable energy producers, buyers? The traders in the middle. In this episode, I'm gonna be speaking to a German trader about the state of the PPA market and how you standardize a process that is complex, unique, and time intensive. But first, I'm joined by our UK reporter, Kelly Paul. A warm welcome to the podcast, Kelly.
Kelly Paul - Reporter, Montel News:Thanks very much, Richard. It's nice to be here. My first time on the Montel pod.
Richard Sverrisson - Editor-in-Chief, Montel News:Brilliant. So Kelly, I mean, we're talking about PPAs. How have they been fairing in Europe this year? what trends have we seen?
Kelly Paul - Reporter, Montel News:So we've been seeing a bit of a slowdown compared to the volumes that were contracted last year that's taking place with a general sentiment that. there's a lot more caution in the market, so there's still this underlying interest and demand for PPAs, but the number of the deals has fallen on the year. So just to share some data with you from Pexa Park, the the Renewable Energy Specialists, they saw that in the first half of the year, the amount of volumes signed by via PPAs was down by 26% on the year. To around six gigawatts. So that's quite a marked decline. And I think that's continued also into September, so the first nine months of the year as well.
Richard Sverrisson - Editor-in-Chief, Montel News:And that's across Europe again?
Kelly Paul - Reporter, Montel News:Yeah, it's across Europe. It's a general trend. it's probably going to be more acute in certain markets. I. Way you're seeing more saturation in terms of renewables, this issue with the negative prices that's you know, proving a little harder for people to, to structure, to, to account for in these in these deals. So that's adding to sort of the, the uncertainty. PPAs are very complex and the contracts are very along by their very nature, the ones that we've seen in recent years.
Richard Sverrisson - Editor-in-Chief, Montel News:But there's a lot of talk about standardizing some PPAs. we are gonna talk about that with our main guest later. But what are you seeing in terms of standardization more broadly across the PPA market? Kelly?
Kelly Paul - Reporter, Montel News:So you will be talking with your guest about this. So there's been I think there is a lot of interest in standardization allowing traders to, to hedge their exposure to capture rates. I hear different things about standardization in terms of. The broader market that many people still think that the deals are so bespoke. Every asset, every energy, renewable energy project is so unique and so is the buyer's portfolio. Their demand, their consumption needs. So very difficult to standardize something like that. But I've just heard very recently that for in the UK there's quite a lot of demand in terms of, from smaller buyers. It just standardized products, makes the market more accessible.
Richard Sverrisson - Editor-in-Chief, Montel News:How does it work as a hedging tool then? You're saying that, you mentioned that the capture rate, which is I suppose where you could also describe it as the, achieve the historic market value of renewable energy generation. But how can PPAs or standardized PPAs be used as a hedging tool?
Kelly Paul - Reporter, Montel News:So the cap rates that we're talking about, that's the share of average power prices, a generation technology typically achieves. So we've seen those rates have been dramatically falling because of the cannibalization so that, that occurs when there are, you have a lot of, Renewable output generating at the same time. and perhaps this will coincide with a low demand period as well. So we have these negative prices. How do you get value from your. Renewable asset if the price is negative. and also that brings a lot of volatility in the market. So these tools, these standardization tools are expected to allow traders to trade away that exposure.
Richard Sverrisson - Editor-in-Chief, Montel News:Thanks very much, Kelly.
Kelly Paul - Reporter, Montel News:Thank you for having me.
Richard Sverrisson - Editor-in-Chief, Montel News:So the big question is, will standardization take off for PPAs? I'm pleased to be joined by Amani Joas, managing director of German Trading Company, FlexPower. Welcome back to the podcast Amani.
Amani Joas - Managing Director, FlexPower:Thank you very much, Richard. Always good to be here.
Richard Sverrisson - Editor-in-Chief, Montel News:Always good to have you on. And I'd like to just start the discussion today by asking you about the state of play in the German PPA market in particular. What's the sentiment? Is there lots of activity? Is there a lot of deals being done or has have things slowed down?
Amani Joas - Managing Director, FlexPower:I think it depends what part of the PPA market that you look at. If you look at the traditional PPA markets, when we're talking about PV wind PPAs for let's say 15 years, then this market has definitely slowed down. I think there's an explanation for it that we get into more later and the answer is value of wind and especially of solar, have just decreased over the last years as we're building more and more of these assets. So volumes if we look at Pexa Park, have come down from a couple gigawatts in Germany after the energy crisis or during the energy crisis, now to less than a gigawatts, I think in 2025. So that part of the market is slowing. And let's discuss this later on, but there's a second PPA market that is not so long tenors. So if we're talking 1, 2, 3 years on more standardized products and this is what we're trading a lot and that we're trading on our platform, power match. There, we've seen deal volumes increase a lot. You can trade them on nmac now, and we have done over 150 deals last year. Smaller tenors, smaller clips but the standardization is really driving liquidity into the market and we find this very exciting.
Richard Sverrisson - Editor-in-Chief, Montel News:That's very interesting and we will return to some of these issues later in the discussions of money. But before we go any, any further, I have to ask you this,'cause this week there was big news and you sold your company. Are you happy? Are you a happy man? Are you pleased with the outcome?
Amani Joas - Managing Director, FlexPower:Yeah we're very pleased. We're very proud. We are now FlexPower a Citadel company, and Citadel is a very sophisticated commodity trader. And the fact that they found our team and our company interesting, was very exciting for us. And their experience, their sophistication, especially when it comes to weather and trading and structuring. And then probably most importantly for our PPA business, their balance sheet allows us to do things that we weren't able to do previously. And we only started three years ago. So as a founder. Joining the biggest, and in my view, best commodity trader in the world is obviously very exciting. And we're looking forward for the time ahead.
Richard Sverrisson - Editor-in-Chief, Montel News:Exciting times ahead, absolutely. And well congratulations on the deal with that money. But let's go back to PPAs. So over the last year the ambition to standardize PPAs has been met with skepticism because of the bespoke nature of each deal and the pace at which the market changes, the volatility of the pricing. What's your view on the standardization of PPAs? Is this the way to go?
Amani Joas - Managing Director, FlexPower:In our view, very much, yes. And I think we, we have to zoom out there a little bit from a what is the PPA? So it's just a power purchase agreement. So essentially you're selling power from any source. Usually we're talking about renewables. The deals that we saw in the past were very bespoke deals over long tenors complicated structures, usually months to years of negotiations, lots of fees for consultants and lawyers, and just a lot of complexity around, around these structures and with the value of solar, especially dropping. A lot of companies and also utilities are asking themselves why would I lock myself into an asset class for 15 years where prices are dropping and the green part of this power is just not as exciting to to purchasers as it used to be, as we're getting more and more renewables into the system. So to give you an example, in Germany will soon have 70% of renewables in the system. And if I'm a big corporate. I have to ask myself the question what's the extra value that I'm getting by? By being able to say, Hey, this is special green power, and this value is just dropping as renewables are coming more and more into the market, so we have the complexity, we have the green condition of the power that both is not running in favor of these structures Now. When we are thinking about standardization, we should think about it more in terms of commoditization of renewables. And what do I mean by that? If you look at sophisticated commodity markets saying gas or an oil, most of these commodities are trading on a hub logic, right? So if you're hedging your power in gas or if you're hedging your exposure in gas or in oil, you do this on hubs, you do this on, gas. I would say in Europe, usually Dutch, TTF and for renewables, we don't have anything like this yet. And I think the market is looking for a standardization with which they can just hedge renewable exposure and with which they can buy renewable exposure and standardization in the way that you can trade it on Enmacc now and in the way that it's settling on the Enmacc indices means that you're not buying power out of an individual solar plant. You are buying the average solar output of Germany and your PPAs are settling on this, and this allows to pull liquidity together in one marketplace, and that allows you to have liquid price discovery. Obviously, you have a lot more competition and you can trade in and out of these products if you don't like the position that you're on and you weren't able to do that, or you're not able to do that in bespoke PPAs because they're very difficult to sell on a liquid market.
Richard Sverrisson - Editor-in-Chief, Montel News:Yeah that's very interesting indeed. I think. So just before we go further, Enmacc is a trading platform, right? It's it's a sort more OTC over the counter trading platform.
Amani Joas - Managing Director, FlexPower:Exactly. Yes it's an OTC trading platform and they took standardized PPA on as a product a few months ago, and we've been trading on that. And it's for municipalities or municipal Statwerk, as we call them in Germany, that want to buy PPAs. It's a way easier and faster way to buy solar shapes to buy wind shapes in the future. We also hope to buy battery shapes in a liquid way.
Richard Sverrisson - Editor-in-Chief, Montel News:There have been moves before, we've seen wind futures, we've seen indices and coming to the market. Why is this different and why do you think this is more likely to succeed than previous attempts at, having a trading renewables on a hub?
Amani Joas - Managing Director, FlexPower:Oftentimes you have a good idea, but the market isn't ready yet and the players aren't as sophisticated as they need to be to think about risk in the right way. And I think we passed this threshold and the catalyzing event to pass this threshold was really the energy crisis. Because before this PPAs were a niche product. And then during the energy crisis they became very attractive. And we saw more and more deal volume, also renewables, leaving the subsidy scheme and doing PPAs in, in this way. So everybody started thinking about it. Trading desks learned how to price them better. IPPs saw the attractiveness in this and just built the sophistication to, to trade in this asset class. And since then we, we had PPAs where all the rage and now the long-term PPAs are slowing down. But people still want to buy wind and solar shapes because if you wanna hedge yourself into the future in a system that is mostly built out of renewables, you don't have many other options.
Richard Sverrisson - Editor-in-Chief, Montel News:So is there a danger that you split the sort of power market liquidity that you have? All these platforms that are splitting all the electricity being traded. The liquidity that is,
Amani Joas - Managing Director, FlexPower:I think more and more exchanges are going to onboard these indices as well. So I'm not so worried about splitting liquidity. It's more that the market needs to settle on one standard that everybody trades on, and that everybody prices and then that actually combines liquidity in the first, for the first time for an asset class that just has never been traded in a liquid fashion before.
Richard Sverrisson - Editor-in-Chief, Montel News:Yeah, It makes a lot of sense 'cause you, as you mentioned, you know these huge contracts that take years to come about and to sign and, all the peoples involved. You are simplifying that process and standardizing it. But just before I go on onto into the nitty gritty here, Amani. You mentioned corporates earlier are you seeing the energy transition or the prioritization of, for example, ESG in annual reports or an earnings reports or sustainability? Is there a move a little bit away from that at the moment?
Amani Joas - Managing Director, FlexPower:We're getting that sense a little bit. Yes. So we are, so we deliver power to large industrials and corporates. And and there are various products that they can select from. They can just have normal spot product. They can hedge traditionally in base load or peak load shapes. But they can hedge way cheaper in renewable shapes because the value of wind and solar is just lower than the base load value. And we can offer a lot of liquidity because on the other side, we have the asset owners that are very happy to sell these shapes for a couple years into the future and lock in the value driven by the fear that solar values keep dropping further. So they'd rather make a deal now. So the corporates that we're talking to, we offer an option. To sell these PPAs in a green fashion, or you can also buy them in just in a gray fashion, right? So you can have them with the certificates added on or off. And at the beginning, everybody wanted them 100% green, and now we're getting this question less and less, and they just want to hedge their power prices with a liquid and cheap product. As I said on the onset, I think the idea that. You have to portray to your customers that you're green. In an economy like Germany where already 60% of power of gray power, quote unquote, is coming from green sources already the premium paid for this is declining a little bit
Richard Sverrisson - Editor-in-Chief, Montel News:in, say for example, we've heard that many people say in the Nordic region that. That PPA, the PPA market is dead. So because there's a, there's often a huge discrepancy between the expectations of producers and off-takers who want, obviously off-takers want the lowest price and producers are, and that that's been absolutely a massive slowdown. Why is Germany and this standardization different Amani?
Amani Joas - Managing Director, FlexPower:Well, the standardization gives you flexibility. So put yourself into the shoes of a corporate that is thinking about doing a PPA. Essentially, the question that you ask yourself is what is the value of solar power 15 years into the future? And you probably have some consultants and analysts that do that math. And if you do the, if you do that math at current price levels at solar, you arrive at a value that is lower than the costs of. Building a solar plant and getting it financed. So essentially we're getting a signal from the market that by pure market prices without any subsidy where, at a place where probably you don't want to build a lot of solar on the other side, obviously we have environmental goals and we have climate goals and those are in a social societal level. And then society says let's have a subsidy scheme that makes sure we still have the build out that we need for this. But market price signals are just not at a level to finance and solar projects at the moment. So for those long-term projects we, we have a bit of a problem, but if you're corporate and you're worried about your price exposure for the next three years, you look into the market and you ask yourself how can I hedge myself? And you can hedge yourself in a standard way with base load. You can hedge yourself with peak load, but you can also hedge yourself with wind and solar again, you're there with consultant and lawyers in the room for half a year, and that's just not very attractive to people that just wanna hedge their power exposure.
Richard Sverrisson - Editor-in-Chief, Montel News:Absolutely. Is there more activity and obviously we're seeing a increased occurrence of negative prices that the market's extremely volatile. And you're seeing even that now with the onset of the 15 minute trading, has this spurred more people to, to look at the standardization of PPAs.
Amani Joas - Managing Director, FlexPower:I think so because a lot of the bespoke PPAs, I think there was a bit of mismatch in information. I think the sellers of the PPAs understood the risks a lot better than the buyers of the PPAs. So if you're a corporate buyer, you probably don't think about PPAs a lot in your day. You buy a lot of stuff for your factory, and buying power is one of the things that you do on a daily basis. So they, a lot of them ended up in bespoke contracts where the negative prices hurt them quite a bit. They bought power for a fixed price that maybe they didn't even need at that point, and then needed to sell this power back at negative prices. So they needed to pay to get rid of that power. And a lot of them woke up after doing deals in 2022, 2023. They saw prices dropping. They were locked in at a high price level, and then exposed to negative prices in a bespoke contract that wasn't structured well and they started understanding the risk in a way that you don't want to understand them, and that is locked into a contract that you don't want to be locked into. So a standardized format that works just like a base load contract is a lot easier for them to understand. And the added value on this is also, you can get out of it, right? You can sell this again if you don't like it, there's a liquid market for it, you can trade out of it and then readjust whatever fits your purposes.
Richard Sverrisson - Editor-in-Chief, Montel News:Absolutely. So you, what you're saying here is a lot of corporates have got quite badly hurt over the last few in the last 18 months, two years.
Amani Joas - Managing Director, FlexPower:I think a lot of them rushed naively into it. But they learned their lessons and they have become a lot more sophisticated. So the questions that we're getting now around the PPAs are more sophisticated in a way that they better understand the risk. And some of them are asking for PPAs that are floored at a price of zero, which is something that you can quite easily structure and they better understand their own profiles and they better understand residual risk. And sadly, some of them had to learn that lesson in a costly way.
Richard Sverrisson - Editor-in-Chief, Montel News:Yep. Yeah, that, no, absolutely. It's, but it's an extremely complex market, and I suppose that's why we have traders like you in the market Amani. I think if we're talking about how the trading operates, is there, are you increasingly using robots, automation, AI in, in the processes in on the platform and the trading that goes on here and with renewables Amani?.
Amani Joas - Managing Director, FlexPower:So on the pricing side, we had models in the past that predict future prices and those are getting more and more sophisticated. And yes, they use machine learning as well, which is just another statistical method. But fundamentally, this hasn't really changed. Where we see a lot of change. And then maybe one more sentence, what we do on the platform as well, we pull liquidity from other players, right? So we call around in the market and we see where the price levels are, and we try to give customers the best spreads. And again that's what standardization can do for you. But when you talk about automation and ai. And we're we're beyond experi experimenting with this, and it's really fascinating. What you can do is when you have a corporate offtaker and they have a certain production profile, the question is given their risk appetite, and this is what we do as a trader and also as a risk broker or risk manager. We think about what is the optimal sizing of PPAs right now and also in the future, and what product works best for you and what product combination works best for you. Maybe you want a little bit of base load, little bit of solar, little bit of wind, and back in the day there was an analyst sitting and doing lots of work to get that perfect fit, and now we do this increasingly with AI agents that we've trained over the last two years, and then we get a profile and that AI agents actually comes back and says, this is the best production pro, or this is the best mix for a consumption profile for an offtaker. Then we check this again and see if it makes sense because we trusted technology maybe 98%, but not a hundred percent. But this has sped up the process of finding a product combination for the customer by a lot. And that's very fascinating to us.
Richard Sverrisson - Editor-in-Chief, Montel News:Absolutely. And maybe that poor analyst who spent months and maybe even longer putting that profile together is now out of a job or has a different job to do.
Amani Joas - Managing Director, FlexPower:Not at all. Like that analyst is now doing something else. That analyst is interacting with the agent model and training the agent model to get better and to be able to price more profiles in a more efficient way. So it's just the job changes. You move away from Excel sheets and you move more onto coding, and then you move more onto interacting with the agent. So obviously the efficiency goes up, but I think mostly the speed for the customer goes up. So if you wanted to do a PPA and you say, Hey, I have this consumption profile, maybe a company like ours would come back to you in two weeks and now we can come back in a day. So we just speed up the market.
Richard Sverrisson - Editor-in-Chief, Montel News:It's a stunning pace of development. It's probably only gonna get quicker as well. But I think, again, that poor analyst is probably gonna be doing the fun stuff now with the with the AI bots and the agents. But I think I also would like to ask your Amani what role do you think data centers and batteries having, the trends we're seeing in Germany, obviously they're gonna be coming more and more in, into the market. What role do they have in the, in the areas and the issues that we've been discussing here?
Amani Joas - Managing Director, FlexPower:So batteries, so here we're talking FPAs rather than PPAs, and it's essentially the same problem with a different asset class, and we've also standardized this. So for us, the standard value for battery is translated into proxy value, which is the high low spread. Because what does a battery do in the most simplest fashion? It charges in the cheapest hour and it discharges in the most expensive hour. Obviously it goes into ancillary markets and does a lot more stuff, but we want to simplify the value and then sell this on again to corporates. So let me give you an example. If you are corporate and you bought some wind and solar PPAs. Now there's a day where there's no wind, there's no solar, and spot prices are super high. You might have that exposure and you can hedge yourself against that exposure by buying a virtual battery. So a high low shape that then on this day has a very high value and you get it at a fixed value and you can use that to manage your residual risk. So batteries are a natural add-on to the wind and solar PPAs and, when it comes to data centers, I think data center demand in the US is amazing and changes the power landscape quite a bit. And we're also seeing a lot of PPAs for wind, solar, and batteries just because of speed you. So if you're not environmentally concerned you might wanna do this with gas because it fits the base law base load profile that most data centers still have better than wind and solar, but it takes a lot of time to get a gas turbine right now. So wind and solar have the advantage of speed in Germany. We have more and more data centers coming on and we have data center customers, but we don't see the strain on the system and we don't see the scale that we're seeing in the US yet, but we're hoping for aI and tech companies to explode in Europe as well. And then I think we will see a similar development as we're seeing in the US.
Richard Sverrisson - Editor-in-Chief, Montel News:But isn't there an issue with grid constraints here? You can't just build a data. They don't just take months. They sometimes take years to get a grid connection and then get operational,
Amani Joas - Managing Director, FlexPower:Right, this is a big discussion we have. The grid providers are, especially in Germany, struggling with the flood of grid requests by batteries mostly, and don't really know how to handle this because we have a less than ideal system where it's first comfort serve, so there's no price on a free option and everybody's, like standing in line and rushing to get that free option. So we definitely need to change the system around this and, now the grid providers, I think for good reasons are saying, should we reserve some of that grid capacities for data centers coming on? And that will like, that's a very fair question to ask. I don't think we should slow batteries down, but we will need a system that selects on which users are the biggest driver of our economies at the end of the day. And I think data centers should be on the top of the list there.
Richard Sverrisson - Editor-in-Chief, Montel News:Absolutely. I think that's quite an optimistic way to end there, Amani.'cause I think we're going to certainly very exciting times. But thank you very much for being a guest on the Plugged In podcast, Amani. It's always good to have you on.
Amani Joas - Managing Director, FlexPower:Thank you so much Richard. Great to be here.
Richard Sverrisson - Editor-in-Chief, Montel News:And new listeners. Thanks for listening to this episode of Plugged In. If you enjoy this discussion, please like rate and follow to make sure you get the latest podcast episodes as soon as we release them every Friday. We'd also love to read your reviews of the podcast. It helps us to keep up to date with what you, our listeners, think of our podcast and what content you want to receive more of. Finally, you can head to montelnews.com for more news and analysis from our team of journalists across Europe and beyond. See you next time.
