Long-term energy contracts now face new challenges

The European Power Purchase Agreement (PPA) market is changing. After years of steady growth, long-term contracts —which secure green energy for businesses and make developers' projects bankable—remain the backbone of the transition, but they now face new challenges: market volatility , price anomalies falling to zero or negative territory, and increasingly severe grid congestion . According to BloombergNEF , an international energy research and analysis firm, the medium-term trajectory remains impressive: by 2035, solar capacity in Europe is expected to triple to 1.3-1.4 TW, wind power to double to over 700 GW, and storage to increase tenfold to over 300 GW. This transformation is driven by rising electricity demand , driven by electric vehicles, heat pumps, and data centers, which are already reshaping consumption. In this scenario, PPAs remain the primary tool for providing investment certainty, even if their rules are changing.

Pexapark , a Swiss company specializing in PPA market analysis and consulting, has defined 2024 as " the big adjustment ": lower volumes, but more contracts. In Europe, 15.2 GW of PPAs were signed, down 11% from 2023, but with a total of 316 contracts, an all-time record (up 14%). Corporate buyers led the growth (up 26%), while utilities reduced their presence by 59%. The number of new buyers also increased: 157 companies signed their first PPA for a total of 5.2 GW. This is a sign of market maturation, where companies seek price stability and green certificates, while utilities are increasingly focusing on their role as intermediaries and balancers.

On the technology front, solar remains dominant with over 8 GW, despite a 28% decline from the previous year. Onshore wind grew by 25% to 3.1 GW, while offshore wind halved to 937 MW. The greatest gain was in multi-technology PPAs , contracts that combine multiple sources such as solar and wind to offer more continuous production: 2.7 GW, +219% from 2023.

Pricing dynamics reflect this shift. The Pexa Euro Composite , the index measuring the average European price of 10-year PPAs for solar and wind, remained at around €52/MWh, with minimal growth (+3%) compared to the beginning of the year. The real novelty was the explosion in hours of zero or negative prices : in Germany, over 450 hours, in Spain for the first time, more than 240, and in Poland, almost 200. Only Italy remained immune, but this may not last. This phenomenon has imposed new clauses in contracts: many buyers refuse to pay for energy fed into the grid during negative hours, others accept mixed formulas that guarantee more balanced compensation. This issue weighs on the bankability of projects and makes the structuring of PPAs more complex.

Looking at the players , the picture is twofold. BloombergNEF's cumulative data shows Engie leading the way, with nearly 4 GW of contracted capacity, followed by Iberdrola (3.1 GW), Vattenfall (2.4 GW), and Statkraft (2.0 GW). However, narrowing our focus to 2024 alone, the picture changes: Iberdrola takes the lead with 1.63 GW, ahead of Germany's Zelestra (652 MW), Engie (621 MW), Statkraft (571 MW), and the Shell–Eneco joint venture (503 MW). This indicates that the market remains competitive and fluid, with positions being redefined year after year.

Digital continues to dominate among buyers : Amazon has signed agreements for 3.6 GW, followed by Google (1.0 GW). Among industrial companies, LyondellBasell (539 MW) and Salzgitter (510 MW) stand out. Vodafone, Ardagh, Tesco, and Ahold Delhaize follow suit. In 2024 alone, the data confirms this trend: Amazon has signed up for 3.63 GW, Google just over 1 GW, while Ardagh (483 MW) and Vodafone (479 MW) have consolidated their position alongside major European retailers. A map showing how big tech and energy-intensive industries drive demand , while large energy groups dominate supply.

Geographically, Spain remains the leading market with 4.66 GW, albeit slightly decreasing, while Germany leads in terms of the number of contracts (48). Italy confirms its position in the top ten with 1.05 GW and a 56% increase in the number of deals, but it remains an expensive and complex market: Italian PPA prices are among the highest in Europe, with average values ​​of €60-65/MWh for solar and over €70/MWh for wind, due to the difficulty of connection and the slowness of authorisation procedures.

2025 begins with further signs of change. According to LevelTen Energy, a digital platform that aggregates supply and demand for PPAs, in the second quarter, contract prices in Europe fell by an average of 5% for solar and 2% for wind, driven by the abundance of supply in markets such as Italy, Poland, and Romania. At the same time, demand is growing for multi-buyer contracts, which involve multiple buyers in the same project, sharing risks and volumes, and for cross-border contracts, which allow a company to source from a plant in another country, expanding options but also increasing the complexity of the clauses.