Ukraine war halting PPAs, driving up prices across Europe

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From pv magazine Spain

Russia's war against Ukraine continues to influence fuel prices. An embargo on Russian imports, the partial suspension of gas deliveries to Europe, and a decline in trading activity are some of the challenges that electricity markets have faced in recent weeks.

The impact on the European power purchase agreement market is a reason for concern. The monthly PexaEuro index by Pexapark shows a fairly considerable increase in PPA prices. Average prices rose 4.1% month on month. France, Great Britain, and Germany showed the highest increases, at 6.9%, 4.8%, and 7.8%, respectively.

In May, there was a decrease in the number of agreements and the volumes of closed PPAs, according to Pexapark. The European Energy Exchange (EEX), the central European electricity exchange in Germany, reported a 30% year-on-year decrease in the trading volume of energy futures in Germany during the month of May.

In Spain, the decline in volumes of energy futures has fallen by 75%, mainly due to the approval of temporary restrictions on the price of gas for electricity generation. Traders have blamed low liquidity and the current price environment, which affects their ability to hedge volumes. In addition, a lack of interest from industrial consumers in signing long-term contracts has been making it difficult to place volumes on the market.

About 393 MW of PPAs were announced in May. That represented a decrease of 55% from April, but is comparable to March.

Pexapark noted that two PPAs were recently signed in Italy, which is a market with a lot of potential that has been held back by long-standing permit problems. “We continue to hope that Italy will soon have its moment to shine,” the company said.

Permits are a key problem for project development. Europe needs to install around 80 GW per year to meet the REPowerEU 2030 targets of reaching 1.2 TW of installed renewables capacity by 2030 – more than double the annual average of the last decade.

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