PPA slowdown – temporary or permanent?

In this episode of Plugged In, we return to Power Purchase Agreements (PPAs) and their role in Europe’s energy transition.

After years of rapid expansion, the PPA market hit a slowdown in 2025. Falling capture rates, rising negative prices and increasing volatility have made deals harder to structure and price, forcing both buyers and sellers to rethink how risk is shared.

At the same time, renewable capacity continues to grow, reshaping price dynamics and pushing the market into a more complex and mature phase.

So is this a temporary slowdown… or a fundamental shift in how the PPA market works?

Richard speaks to Luca Pedretti, COO and co-founder of Pexapark, and Chirag Ahuja, Implementation Director at Broadpeak Partners, to break down the data, trends and structural changes shaping the market. Setting the scene is our Italy correspondent, Alina Trabattoni.

Host: Richard Sverrisson – Editor-in-Chief, Montel News

Guests:
Alina Trabattoni – Italy Correspondent, Montel
Luca Pedretti – COO & Co-founder, Pexapark
Chirag Ahuja – Implementation Director, Broadpeak Partners

Editor: Oscar Birk
Producer: Alexandra Carlon

#EnergyMarkets #PPAs #Renewables #EnergyTransition #PowerMarkets #BatteryStorage #CleanEnergy #EnergyTrading #ElectricityMarkets #NetZero

Transcript

Capture Rates Explained Simply

2025 Dip And New PPA Products

Richard Sverrisson – Editor-in-Chief, Montel News 0:07

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. Today we're looking at the changing shape of Europe's power purchase agreements, or PPAs for short. The long-term contracts that help renewable energy projects get built and financed. One phrase you'll hear throughout this episode is capture rates. The capture rate is the share of the wholesale power price that a renewable generator actually receives when it sells electricity. Because solar and wind produce power when conditions allow, and often at the same time as many other renewable assets, they can end up selling into an oversupplied market when prices are lower. So even if headline power prices look strong, the price a solar or wind project actually captures can be much lower. And that matters because falling capture rates, more frequent negative prices, and a more volatile market have all made PPA negotiations more complicated. After a long period of growth, the market has entered a mature phase, one where risk, flexibility, and deal structure matter more than ever. To help us set the scene, I'm joined by Italy correspondent Alina Trabottoni.

Alina Trabattoni – Italy Correspondent, Montel 1:23

Hi, Richard. Great to be on the podcast.

Richard Sverrisson – Editor-in-Chief, Montel News 1:26

Today we're we're talking about PPA's power purchase agreements. The market had a fairly rough 2025, I think it's fair to say. Do you think this is it's in structural decline or just going through a tough patch here?

Alina Trabattoni – Italy Correspondent, Montel 1:41

Well, Richard, it's actually neither a collapse nor business as usual phase. What we're seeing, at least according to many of the analysts and experts I speak to, is that the market's maturing after a very long growth phase because for years the conditions were almost ideal. There was local curtailment, plenty of off takers, nice strong price signals. But it appears that that era is over. Renewables have flooded certain markets, capture rates have dropped sharply. That's always bad. Negative prices have become routine in places like Germany, and the result has been a real structural dip in PPA volumes in 2025, particularly in southern European solar and northern European wind markets. And that's been the first such structural fall in a decade. But in actual fact, the underlying demand for long-term clean energy contracts hasn't gone away. What's actually changed is the risk profile. Buyers and sellers are having to get much more sophisticated about how they price and how they share that risk. I'm researching, for example, a very interesting new product which is expected to grow in terms of development in Europe at the moment. They're called nighttime renewable PPAs, and they've just they're just some of the new products developing, and that's definitely a sign of a maturing market, not of a dying one.

Geopolitics And The PPA Timing Trap

Richard Sverrisson – Editor-in-Chief, Montel News 3:01

You can expect some kind of you know a cyclical element to this as well. And it sounds like there's a lot of consolidation going on as well as increased complexity. But you know, if we look at the current geopolitical situation, particularly the crisis in the Gulf, Alina, how is that affecting PPA deals?

Alina Trabattoni – Italy Correspondent, Montel 3:19

Well, obviously the geopolitics can and is changing from hour to hour and day to day, as we've seen in past days. But the picture is actually much more nuanced than it may appear. You've got rising gas prices and then they drop quickly. Um, but you know, we've had rising gas prices for a prolonged period and forward curve volatility that have pushed up PPA fare values significantly at the short end of the curve. And that should, in theory, make renewable contracts more attractive relative to fossil alternatives. But on the other hand, when you've got a sharp spike that's driven by geopolitical risk, buyers tend to pause. That's because there's uncertainty about whether this is a temporary shock or a sustained shift. And there's also a timing mismatch. These shocks play out over days or weeks, while a PPA transaction typically takes six to nine months to close. And until that question's answered, many corporate offer takers would prefer to wait than lock in a long-term contract at a price that may look very different in six months. So paradoxically, even absurdly, as one analyst I spoke to recently said, a more volatile gas market can actually slow PPA transaction volumes in the short term, even though it improves the underlying economics.

Where PPAs Thrive Across Europe

Richard Sverrisson – Editor-in-Chief, Montel News 4:38

No, very interesting, Alina. And and where would you say in Europe, where where are the bright spots for PPAs and where is the market actually struggling?

Alina Trabattoni – Italy Correspondent, Montel 4:48

Well, at the moment, Italy is doing relatively well. Poland has been performing very well. Spain obviously remains the largest market in Europe by in terms of volume, consistently delivering multi-uh gigawatt deal flows, despite all the challenges that exist around solar capture rates, which we're all very aware of. And the markets that are struggling and those with high solar saturation and weak industrial demand, and also uh the ones with attractive auction alternatives that simply outcompete the merchant PPA route. Germany's a good example. The auction mechanism has been more attractive than merch and contracting for many developers. So PPA liquidity there has thinned. Um, but the theme emerging strongly now is hybrid structures. So we're talking solar paired with storage, wind and battery co-location, multi-technology portfolios. That's where the growth is, that's where the real growth is because it addresses the core problem, which is buyers want firm shaped power, not a pure payers-produced solar profile.

Negative Prices Reshape Contract Terms

Richard Sverrisson – Editor-in-Chief, Montel News 5:57

Fascinating, Alina. Thank you very much indeed for your insights and your explanations here. Thank you. Alina paints a picture of a market that isn't disappearing but becoming more sophisticated, with buyers and sellers having to think much more carefully about pricing, volatility, and how risk is shared. So, what does that mean for the companies trying to get these deals done? To unpack that, I'm joined by Luca Pedretti, COO and co-founder of PEXAPark. Welcome back to the podcast, Luca. Great, Richard.

Luca Pedretti – COO & Co-founder, Pexapark 6:29

Yeah, indeed. It's been a while.

Richard Sverrisson – Editor-in-Chief, Montel News 6:30

I hope you're well. We're here to talk about the the PPA market. What's what how would you characterize the the current state of play, uh Luca?

Luca Pedretti – COO & Co-founder, Pexapark 6:39

It's gotten a bit more opportunistic and value-driven. When we look back doing this for more than 10 years, it has been a huge growth phase just in the PPA space, and now we're in a completely different market regime. Markets have been inundated with renewables, and this had an impact on the PPA market.

Richard Sverrisson – Editor-in-Chief, Montel News 6:58

In what way? What can you describe? I mean, I'm often I've I've used the phrase the three C's, so congestion, cannibalization, and um curtailment.

Luca Pedretti – COO & Co-founder, Pexapark 7:07

Is that is that also Yeah, they were all very low 10 years ago, and this is when the PPA wave really started, started in the Nordics and in Poland, and then it spread all over Europe. And there were plenty of offtakers, there was plenty of liquidity, and there was low C's, yeah, low cannibalization, low curtailment, which was a perfect environment for PPAs, and now it's a bit harder. That's why when we look at the last year in 2025, we had uh a first real structural reduction in the PPA market. It was like 15 gigawatts overall, which was 20% less than the year before. And what we saw is in in certain markets, like in Germany, solar capture rate went from the high 90s to the low 50s, yeah, yeah, in percentage of base load. Then we have negative prices exploding, a big topic on your podcast in our price intelligence. You have five to six percent on average of all hours in Europe being negative. And if you're a solar producer in Germany, for example, 25% of your hours are in negative price territory. And of course, this has a large impact on your contracting.

Richard Sverrisson – Editor-in-Chief, Montel News 8:21

This trend we saw in 2025 will continue, Luca?

Luca Pedretti – COO & Co-founder, Pexapark 8:26

Yeah, I mean, overall, I think we do see also some market saturation, so we don't have demand growth. That's one big thing, but there is just a finite demand for solar profiles at some point, and that's why we see trends, and we'll surely talk about it for co-location or standalone battery off takes. But what is also important to say the PPA market is a cyclical beast. A lot of factors have to come to play. So prices have to be sufficiently high that everyone is happy, so you have to meet an investment threshold, the auction has to be lower or less attractive, there has to be an industrial there. So a lot of things have to come together. So we think the market has become very mature, very professional, and we would expect something much more cyclical, like gas turbine investments. You have years with lots of investments, and then you have years where there are not so many deals.

Richard Sverrisson – Editor-in-Chief, Montel News 9:24

So we could be in a lean year this year as well, then, uh Luca, is that what you're saying?

FPAs And The Boom In Storage

Luca Pedretti – COO & Co-founder, Pexapark 9:28

Yeah, but I mean, still it's very large. So we're talking 15 gigawatts. When you look at the Euros underlying those investments, that's huge. And the PPM market historically has been just one-third or one-fifth of uh around those figures of the overall investment market because you're in competition with the auctions. So I think this market will be here. It's all over Europe. We see it in Poland, you see it in Italy, you see it in Spain, and you know what? There's so much negative press because we're focused on those temporary issues due to high renewables, which will be solved again by the system. But Spain still does 3.5 gigawatts of PPAs and mostly solar. So, despite all the challenges, the market is there, the market is moving, and people are adjusting. And the biggest theme over the last 12, 18 months has been how to deal with negative prices. And there are huge price differences between PPAs that have take price risk on the negative side or not, which shows it's a just another way of signaling this is the value of flexibility, and that's why we have this boom. When you look at the overall clean energy offtake market, it's gotten much bigger. Why? Because we have all those batteries, we have battery offtake agreements, which we call now FPAs. I spent a bit in the industry discussion. What shall we term this? And we I think we have come to this conclusion. And what we call FPAs are purchase agreements from storage best units that take price risk. So not an optimizer agreement. That would be more like a route to market, which is one year, and you optimize on all the possible markets. An FPA is like a floor, a swap, a toll five years, three years, seven years, something which enables leverage and very similar in this way to a long-term PPA.

Richard Sverrisson – Editor-in-Chief, Montel News 11:27

So, what does the F stand for in the

Luca Pedretti – COO & Co-founder, Pexapark 11:29

Flexibility!

Richard Sverrisson – Editor-in-Chief, Montel News 11:30

Flexibility, a flexible power agreement.

Luca Pedretti – COO & Co-founder, Pexapark 11:32

Flexible purchase agreements. A flexibility purchase agreement. FPA and PPA. Correct.

Richard Sverrisson – Editor-in-Chief, Montel News 11:38

Yeah, okay. We got that in the alphabet soup again. But yeah, if I can turn the question back to you then, Luca, in a sense, like how do you deal with negative prices? This is one way then, with those flexibility options, so co-location with batteries or just single, single, just purely batteries.

Luca Pedretti – COO & Co-founder, Pexapark 11:54

Yeah, on a single asset basis, if you cannot add a battery, which you can add for multiple reasons, not just for the negative price risk. If it is on a single asset basis, there's two ways you can mitigate it contractually. So you agree with the buyer on how to share the risk, or you agree to take the full risk and you get a huge price increase. But then you need to think of fundamentally will this negative price risk stay? Will it get worse? How will it be in three years? And then you need to look at fundamentally how the market develops. And what we clearly see is we're not through the doldrums. I mean, there's still two, three years where we clearly see there's a flexibility gap massive, which means those capture rates, those negative prices, we will continue to see them. But at some point, those gigawatts of batteries, demand side flexibility will have an impact, and those negative prices will vanish again.

Richard Sverrisson – Editor-in-Chief, Montel News 12:56

How far are we away from that? You've got your I'm asking you to get your crystal ball out here, Luca, but yeah.

Luca Pedretti – COO & Co-founder, Pexapark 13:01

My crystal ball, it's always wrong, my crystal ball, so I don't trust it. What we definitely what we definitely see is that also the way market participants are pricing, and those price takers they say something. I mean, if you have to price and take those risks, you you will be cautious. So over the next two, three years, we're not expecting a release of pressure in the market. So when we just look at the the storage space, it can't be built fast enough. I mean, on the FPA side, so like tolls and floors, we're expecting more than 10 gigs this year. But when you look at the overall system, how big it is in terms of peak demand, there's still a way to go.

Richard Sverrisson – Editor-in-Chief, Montel News 13:48

I mean, I think we've absolutely as as we've spoken about on this podcast and has been in the news more more more generally, is that there has been a massive increase in in negative prices in certain markets in particular, and markets have never seen them before as well. So that's been a key element of the picture, has it not, Luca?

Portfolio Scale Versus Niche Survival

Luca Pedretti – COO & Co-founder, Pexapark 14:07

Yeah, it has. But on the flip side, that's why we have this boom in battery. So the only thing, I mean, the only thing let let's speak in relative manners. I mean, what you really can do right now is you can co-locate, you can build standalone bests, and you can be opportunistic on the PPA side, looking at at the cross-country multi-technology portfolio. That's why we also see this larger and larger place on the IPP side, because on a portfolio level, you can deal with those risks very well. I think that's another trend that we were always thinking the last 10 years in deal by deal, and which was asset by asset. And most of those energy transition progress problems, yeah. We create problems by installing so much renewables, which we have to deal with again. They can be dealt with much better on a system level, on a portfolio level.

Richard Sverrisson – Editor-in-Chief, Montel News 15:06

So with IPP, another another bit of jargon for for those listeners out there that may not be familiar with the term as um independent power producers. Um, so you're saying that they can aggregate uh and create a portfolio of assets rather than a single asset that makes a difference, and they have maybe cover different jurisdictions, different countries here.

Luca Pedretti – COO & Co-founder, Pexapark 15:26

Absolutely. Absolutely. That that's the basically the um the development which came along with the renewables. Uh, renewables were driven by developers and IPPs. There were the new kids on the block, and those new kids got very big. Yeah. When we started 10 years, a fund was one country, 200 megawatts, that was big. And a few years you would have said, Wow, two gigawatts, a few countries, that's big. Now we're talking five to ten gigawatts as an ambition, multi-technology, multi-country, having your own origination team, your own trading team. Because what you really can do is you take those risks, you look at them on an aggregated level, and they can smoothen and even themselves out. So if you're suffering from high price volatility, well, a battery gains in value. So the question is what is the right mix? What is the right strategy? Of course, investment is always difficult, but there's value to be made. It's just the value pools are always shifting, but it's very clear where. You need to have more done in-house in terms of trading, optimization, analytics, and you need to be bigger, you need to spread the risks across technologies and countries. And probably the real insider thing on my side would be just don't focus just on renewables. I mean, let's broaden it a bit because it is not just solar and wind and batteries. Maybe mix in a bit of gas, maybe mix in a bit of hydro or operating assets to create more stable revenues.

Richard Sverrisson – Editor-in-Chief, Montel News 17:02

So that's that's a good tip for those out there. I think that look up. But that you'd what a market you're describing is a market of the big boys, pretty much, you know. So you you if you're a small, you know, small company wanting to get into the renewable space, you've got maybe between 50 a portfolio of 50 to 100 megawatts, you're gonna struggle.

Luca Pedretti – COO & Co-founder, Pexapark 17:20

Well, actually, that's interesting that you ask. I think actually it is the extremes. Either you become uh very big and diversified, or you are very niche, like you're very good at understanding the finish balancing mechanism and having locally built a portfolio and the trading skills that you know how to deal with it, and you open it to third parties. So I think it's both. Either you're hyper focused and specialized in one value pool. This can be a geography or a technology or a specific skill, or you're very big to afford and playing among the big utilities.

Richard Sverrisson – Editor-in-Chief, Montel News 17:55

Massive increase in complexity here that you have to deal with. I mean, uh 10 years ago, 10, 15 years ago, we didn't have Picasso, we didn't have Mari, we didn't have all these different markets or these ancillary services as well, which are adding obviously adding to revenue possibilities, but also to the complexity, and that you would have to have some in-house people who could understand and act on those, isn't it? So you need to that that's also an investment for for for these for these kind of players.

Luca Pedretti – COO & Co-founder, Pexapark 18:21

Yes, and this is uh a big bottleneck just when you look at the people side. I mean, we where do you get where do you get the people from? Yeah, and the the the resource pool is rather limited, and also from a business model, you cannot rebuild the utility with hundreds of people. So you have to be very focused in what you do inside in-house and what you do externally. But those IPPs are succeeding. We are seeing we call them next-gen IPPs. It's probably that there will not be 50, but maybe 20 or 25 over the next five to six years, and they're building teams of 60, 70, 80 people over time. And the other thing what we're seeing is utilities are very much back in the game also on the PPA side, especially on the FPA side, because this is what really goes to their strength. They already have a portfolio, they have a trading desk, they have the analysts. So they're actually, and you see it in the stats, uh, they're showing up in in bigger numbers on the off-taker side.

Richard Sverrisson – Editor-in-Chief, Montel News 19:26

You mentioned the positive side that the market is still growing or still developing at a great pace. Where are the the hotspots, if you like, or the the real bright spots, if you like, in the PPA market, Luca?

Luca Pedretti – COO & Co-founder, Pexapark 19:37

I would say Italy has been doing very well, Poland has been doing very well. Spain, despite the news on low capture and and negative prices and and the blackout, always consistently been the biggest market multi-gigawatt. So it is it's still going strong. Germany always a bit a laggard, but lots of competition there on the auction side, wind still typically being above PPA rates. Yeah, this is a bit also uh UK, we would love to see much more, but I think when you look at the auction results versus PPA levels, there's just too big a gap that the free market could prevail.

AI, Data And Regulatory Complexity

Richard Sverrisson – Editor-in-Chief, Montel News 20:18

Yeah, yeah. And what how about uh AI? I mean, isn't we talked about sort of independent power producers or companies setting up with uh 20 to 50, initially growing to 70, 80. And surely AI has a role here. Could you describe how AI can help these kind of uh businesses?

Luca Pedretti – COO & Co-founder, Pexapark 20:36

Well, first we uh first we really hope that AI is creating new demand in Europe, which it is not yet. Definitely not comparable with with, for example, the US market. Then also to apply AI successfully, you need to already have the basics in place, you need to have the IT in place, the data accessible. So it's rather something used by larger players. We see it more on the provider space, like optimizer or large utilities that have large data sets and can make use of machine learning of large language models to help optimize, for example, a trading algorithm. Again, there you need a certain size, a certain investment to make this really valuable and practical.

Richard Sverrisson – Editor-in-Chief, Montel News 21:22

And I think, do you feel that there is enough support from policymakers for both national and EU level? I think there is, we'll come on to potentially what's happening in the Middle East in a in a moment, Luca, but there is certainly a push to to generate, to get more PPAs on the table, to get more deals done, to have more renewables in the system.

Luca Pedretti – COO & Co-founder, Pexapark 21:45

Yeah, the intention definitely is everywhere positive, trying to support, but it is a very complex undertaking just on the regulatory side. It is just getting more and more, and also for the teams to understand it actually plays to the strength of larger player. You need to have quite an apparatus of people and systems in place to understand what regulation is actually creating. And it's even you see regulatory opportunity because you understand so well how this auction system or the future of this auction system is going to look like that you see value for yourself going into that. And that's a bit a different kind of business opportunity versus oh we see demand growth and falling technology costs. Let's let's invest in this

Richard Sverrisson – Editor-in-Chief, Montel News 22:36

yeah now it's a different situation entirely. And the situation in the Middle East obviously this is you know uh laying bare our reliance our dependency on fossil fuels and what that means not just for for power and energy prices but also for industry in Europe. Is that spurring more interest and more interest in PPAs, more interest in deals? How is it having an impact? Maybe it's still too early to tell but or seeing the impact there but

Luca Pedretti – COO & Co-founder, Pexapark 23:06

I think generally the marketplace were much better prepared compared to when we had the Russian war against Ukraine and this started much earlier when they started to to throttle gas supplies to Europe and prices went up we see people much better prepared like the way they look at risk and how they hedge and the first impact of course has been on the short end we saw gas prices going up we saw Cal 27 going up and now the longer the longer it continues the more of price risk is is spreading through the curve. So we see prices going up at the further end and this is affecting of course all type of energy contracts as well as PPAs. Fair values are significantly up now we would say 20% on the short end but this is not automatically translating into higher transaction prices because we have a spike we have geopolitical risk and there is a bet is this now short term for four weeks. How big really is the damage and is this actually overstated for obvious reasons or not. So but right now this risk is actually the likelihood of sustained increases in in prices is increasing. But as you said typically if such a spike happens people would rather take a step back from doing transactions right away.

2026 Data And Signs Of Recovery

Richard Sverrisson – Editor-in-Chief, Montel News 24:37

Yeah yeah taking all the complexity there it's just adding to the mix isn't it of a very very complex marketplace and you you know you you're adding adding to the to the yeah to the risks as it were um Luca once again thank you very much for being a guest on the Plugged In podcast. Luca's view is that this is still a big market but one that is becoming more cyclical more selective and much more complex than it was a decade ago. The next question is whether the numbers point to a recovery and how batteries, hybrid structures and more sophisticated contracts are starting to reshape the market. Joining me now is uh Chirag Ahuja uh who's implementation director at Broadpeak Partners. A warm welcome to you Chirag.

Chirag Ahuja – Implementation Director, Broadpeak Partners 25:25

Thank you Richard pleasure to be here.

Richard Sverrisson – Editor-in-Chief, Montel News 25:27

We're we're talking all things PPAs today and there's a lot of talk about the the market slowing. What in your view what do the numbers actually show?

Chirag Ahuja – Implementation Director, Broadpeak Partners 25:35

Yeah sure absolutely so uh in well my opinion and what I've researched is as per Plexapark data Europe has signed about 15 gigawatts of PPAs in 2024 which is a drop uh from 13 gigawatts in uh 2025 so it's roughly a 15% decline but now in 2026 if you see cumulatively we have signed about 42 deals amounting to three gigawatts of power uh so it does seem like a V-shaped recovery I'd argue so it's a pretty decent start to 2026. However what's really interesting Richard is that batteries and battery link deals are getting very interesting and they seem to be growing very very fast compared to previous years. Therefore I think that the market is not really shrinking or slowing but it's adjusting to realities which in my opinion is very positive and a healthy sign as it's aligning with the overall system complexity.

Richard Sverrisson – Editor-in-Chief, Montel News 26:40

We'll come back to batteries in a minute uh Chirag but are there any sort of particular deals that you'd like to highlight in terms of interesting or showing some kind of a new direction or a quite novel or innovative?

Chirag Ahuja – Implementation Director, Broadpeak Partners 26:53

well the overall structure is getting quite innovative again it points me towards what I do on a daily basis and that's getting this data in and out of systems for various companies and we're seeing these the contracts themselves becoming more and more complex and linked towards other variables so the structures are becoming more complex the deals are taking more time on on the deal specifics I wouldn't be able to point out as such but the overall situation is becoming a bit much more complex in my opinion.

Richard Sverrisson – Editor-in-Chief, Montel News 27:23

So what's brought on this development in batteries? Why are they suddenly so hot now is it to do with you know uh curtailment uh cannibalization and congestion or is it more in a combination with negative prices um what what what's happening here Chirog if you can highlight some of the main main trends and why this is happening

Why Batteries Are Hot Yet Constrained

Chirag Ahuja – Implementation Director, Broadpeak Partners 27:45

yeah absolutely so in 2025 uh europe added about 27 gigawatts of storage and that's a 45% growth year on year massive and and the deal count has been three times higher than 2024 so demand is strong and batteries are clearly growing fast but there's some real constraints right around that the grid connections are limited, the permits still taking time in my conversations with our business and our clients the market rules are itself changing and becoming more complex and and financing of these new hybrid innovative structures is just taking more time because the finance people are trying to get used to uh these kind of uh deals so the issue is I think not whether batteries make sense but how fast can we actually build them with these supply chain constraints we're seeing globally along with how we can connect that to the grid. So the technology is ready but there's a wider much larger ecosystem at play which is far more complex and will take some time getting used to onboard these new systems.

Richard Sverrisson – Editor-in-Chief, Montel News 28:58

These kind of new increased risks for you know or are they, so that they're reshaping the risks that have always been there in a sense?

Chirag Ahuja – Implementation Director, Broadpeak Partners 29:06

Oh absolutely so it's new risks which are coming on the buyers are getting more savvy. Earlier it was not the case right prices were not so volatile the contracts were quite straightforward but but now the buyers are able to visualize and understand risk better so they want better terms they are able to drill down on the granularities of the contracts there are more and more what-if clauses flowing into these contracts who takes on the risk of negative prices what happens if prices go below zero who takes on that shape profile who takes care of imbalance costs earlier that was so much because the volatility of the market was not as much as it is now these were not probed into so much but now lately more and more of this is coming in and of course uncertainty has a price itself and that takes time to be reflected in these contracts

Richard Sverrisson – Editor-in-Chief, Montel News 30:08

I think yeah that's very interesting indeed Chirk I mean I if we're talking about Europe as a whole do the same conditions prevail in every kind of national market or are there differences in terms of the obstacles that you mentioned so in some markets may more be around financing or economics or regulation what what are the you know where can you highlight some of the differences that you're you're seeing in Europe?

Fragmented Markets And Southeast Potential

Chirag Ahuja – Implementation Director, Broadpeak Partners 30:34

Oh yeah sure absolutely so in actually Europe is quite fragmented uh from a PPA perspective and from the market perspective it depends on where in the cycle you are of uh this system this process so for example Western Europe Germany started out quite early and there's a lot of solar uh and if everybody is producing solar at the same time the prices are uh prices are low right so that's the challenge being faced by Western Europe but other markets like Poland and Hungary where there's stable demand the regulations are good and supportive the the structure is better there's a there's a grid which is well developed. we're seeing a growing surge of PPA volumes there. However if you again move towards the Southeast Europe like Bulgaria Romania there we are seeing that the grid is not as developed as Western Europe but it's getting there. The financing also is not as mature as Western Europe but there is sprouts and activities of deals which I think will just scale in the future as we go forward.

Richard Sverrisson – Editor-in-Chief, Montel News 31:42

You mentioned um you know Southeast Europe Romania Bulgaria uh Greece as well I mean there's huge potential here isn't there I mean what needs to really what needs to happen to accelerate growth in those areas Chirak?

Chirag Ahuja – Implementation Director, Broadpeak Partners 31:57

Absolutely I think grid infrastructure has to become more modern and more developed so that they can have these facilities more and more come up regulatory frameworks are still evolving there and this will take some time to depend upon each jurisdiction each nationality how they play their part that takes a bit of time financing has to catch up and become more mature the deals have to be understood well by all parties involved the maturity of buyers and sellers there is coming up is growing so several factors have to fall into the place it's it's like a big puzzle right different players have to fill in their different pieces and all of them have to play their role and when the when everybody reaches a certain maturity in this cycle then I think we'll see more and more deals uh surging there and obviously you're seeing co-location and hybrid deals as well growing as well is that is that is that a growing trend yeah absolutely but uh the problem is that uh the it's not a magic wand and just having that in place uh uh cannot solve these several issues which are linked with PPAs however co-location of course is uh is a trend we're seeing a surge in that as well hybrid deals getting your batteries connected to where you're producing the power but the problem again with that is battery is not the magic wand right you just can't put in batteries and answer all questions it can help you get more of the higher price power towards the later part of the day but at the moment it's again it's self-constrained there's supply constraints there's a uh there's a geopolitical global situation where there's a huge, a dearth of supply of these raw minerals to produce these batteries and the value they capture uh is not what the whole uh picture really is what a base load can offer you so while it's getting there it will take some time and it will take some time to mature.

Richard Sverrisson – Editor-in-Chief, Montel News 34:00

Absolutely and and the markets generally are are are growing in complexity as well with uh you know on in all the different time frames ancillary services balancing markets Mari Picasso these are all increasing the complexity of the markets as I said but you you mentioned volatility in PPA prices uh Chirag what what is the what are the main reasons for what's what's beh the main reasons behind that what's driving it? And how and how are buyers and sellers reacting to that volatility?

What Drives Volatility And Risk Pricing

Chirag Ahuja – Implementation Director, Broadpeak Partners 34:29

Yeah so well by the definition of it's a power purchase agreement PPA and volatility of PPS is just a reflection of the underlying market which is volatility of power prices I see three drivers driving the volatility of this first is there's been a surge in the volatility of power prices itself primarily driven by gas prices and the geopolitical context we are sitting in current currently uh second there's a huge growth in supply of renewables especially in developed markets where that itself is hindering becoming a problem and then we're seeing a sort of cannibalization of prices where if everybody's selling lemonade at 12 pm right prices are going to fall and more solar of course lowers the daytime prices even further and third which we I think touched upon a bit earlier is uncertainty uh of future prices just the world is just becoming more and more volatile there's and there's a price to uncertainty and because of this I think European PPAs have shown strong swings because developers and buyers are now pricing in this uh uncertainty so so buyers are becoming more cautious and sellers are asking for better terms this creates volatility ppa prices move because power markets move.

Richard Sverrisson – Editor-in-Chief, Montel News 35:53

Absolutely it's all about the the underlying conditions there and you you mentioned uncertainty and certainly one of the factors driving that is the current energy crisis we've now threatening to obliterate Iranian civilization we now have a a ceasefire in the Gulf and there's an energy crisis brewing which is tied to to gas to fossil fuels so why surely there should be the a surge in demand for for PPA deals for looking at securing renewable clean energy um why are we not seeing that happening?

Chirag Ahuja – Implementation Director, Broadpeak Partners 36:26

Yeah absolutely this is where timing matters right so if uh in the current geopolitical context of course fossil fuel prices in the short term have skyrocketed but if you look at the longer term contracts if you look at Brent 2027 it's still hovering around 75 70 dollar range while it has seen a bump up it's not really as devastating as the short term market is I I guess probably the overall market knows that this is going to be a V-shaped recovery as of today Wednesday when we're talking we're seeing a ceasefire but coming back to your question yeah solar doesn't capture that average price PPAs do not capture that average price so to to give an example Germany 2027 delivery baseload power is hovering about 90 to 10 megawatt but solar only is capturing about 40 euro 45 euro per megawatt hour so it's learning it's it's earning less than half of that that's because solar is being produced when the prices itself is low. We're moving towards a more granular market it's about the hours of when the price is produced so even during a crisis PPAs are not being seen how beneficial they are and that's not being fully captured yet. That's why demand isn't surging as much as it could have one would intuitively predict because of rise of fossil fuel prices because these are a bit separate in terms of when the power is delivered and that again circles back to the complexity of batteries and joining batteries to these plants to get a bit more of that power out in the later half of the day where power prices are a bit higher.

Richard Sverrisson – Editor-in-Chief, Montel News 38:13

So that's the solution yeah getting batteries in and getting them in at scale to deal with to trying to capture more of the value of the forward curve is that what you're saying here Chirag?

Why Crises Don’t Automatically Lift PPAs

Chirag Ahuja – Implementation Director, Broadpeak Partners 38:23

it's a part of that well the complexity is I don't have a solution the one of uh the ways uh I think the global market is looking at it europe is looking at it is is building more battery capacity trying to or layer out that production volume the the the power it how how renewables work it doesn't depend on demand right it depends on nature so it has to follow nature and as technology what we can build is technologies like batteries to spread out that power produced across across the year so it is a partly a solution but as you know the grid is so much more complex than that there's imbalanced prices there's uh peak loads pace loads all kinds of interactions which have to be taken care of all of this economics has to be modeled in properly by both buyers and sellers and fascinatingly buyers are becoming more and more savvy we're seeing more and more consumers industries implementing more and more technology into their processes because handling this stuff again requires expertise you need the right people you need right technology this costs money more and more complex contracts is more uh complex to execute so operationally also it becomes a higher cost and locking in that knowledge and expertise right now would help companies pave the way for the future.

Richard Sverrisson – Editor-in-Chief, Montel News 39:52

Fascinating and Chirag I think you you mentioned volatility you mentioned uncertainty the geopolitical situation um you know uh the disparity between forward prices and captured prices negative prices are there other factors that are make that are making it harder to get PPA deals done is it maybe pricing risk allocation or is there something more structural that's sort of holding back those deals being signed off?

Standardisation Next And Closing Remarks

Chirag Ahuja – Implementation Director, Broadpeak Partners 40:20

No in my opinion uh we're seeing a resurge in BPAs while 2025 is probably lower compared to 24 but 2026 we're already seeing a strong start I think we're going to see a V-shaped recovery as buyers and sellers become more uh savvy as they iron out more of these what if clauses I think the complexities and understanding of how these complexities will be managed will get standardized by itself market will come to hopefully a sort of master agreement around PPAs that in case of this this happens in case of this this happens if prices go negative the risk is allocated in so and so ways negative pricing is not helping buyers and sellers because the frequency of that happening has now increased as well so but once we get to a structure I think there's a bit of a slowdown because it's it takes two sides to negotiate a deal and both sides are trying to understand what to do if this happens but once they get around that that expertise is built that ecosystem is built and then it should get more and more standardized as we go in the future.

Richard Sverrisson – Editor-in-Chief, Montel News 41:35

Excellent Chirag thank you very much for being a guest on the Plugged In

Chirag Ahuja – Implementation Director, Broadpeak Partners 41:39

Hey thank you, pleasure to be here thank you Richard.

Richard Sverrisson – Editor-in-Chief, Montel News 41:42

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