Pexapark: European PPA prices rose 2.3% in July, Spain down 3.9%

en.Wedoany.com Reported - The latest index released by Swiss consultancy Pexapark shows that Europe's long-term power purchase agreement (PPA) market showed divergent trends in July, with the Euro Composite index rising 2.3% to €45/MWh, with notable differences across countries.

The UK recorded the largest monthly increase at 5.8%, followed by Italy with a 4.3% rise. Both markets were driven by stronger forward power prices, with the gas market continuing to price in risk premiums amid geopolitical instability, providing support for upward price movement.

Markets with higher renewable penetration saw declines. Nordic PPA prices fell 6.3%, Spain dropped 3.9%, and Portugal declined 2.9%. High shares of renewable generation lowered long-term power price expectations, in turn affecting the valuation of renewable supply contracts.

The price decline in the Nordic market was mainly related to a revaluation of Danish PPA Fair Values. The adjustment incorporated updates to the Market Price of Risk and new forward capture price curves. High renewable generation coupled with ample hydropower reservoir levels also continued to weigh on long-term price expectations.

Despite price volatility, contract activity remained robust. In July, 24 PPAs were publicly announced across Europe, with contracted capacity of approximately 1.1 GW. Corporate buyers participated in 21 of these agreements, corresponding to around 770 MW of disclosed contracted capacity; utilities signed 3 contracts totaling approximately 620 MW.

The largest deal of the month was a 332 MW PPA signed by Ørsted with a consortium of investors for the German Gode Wind 1 offshore wind project, which was in the process of exiting its subsidy scheme.

Solar PV remained the dominant technology in the PPA market, accounting for roughly one-third of disclosed contracted capacity. Hybrid technology and onshore wind PPAs each represented about one-quarter of announced capacity.

The storage market was also active in July. Pexapark recorded 9 battery energy storage system (BESS) agreements announced across Europe, corresponding to approximately 865 MW and 3.1 GWh of disclosed contracted capacity.

Tolling agreements accounted for 4 of these transactions, concentrating the majority of capacity. Zelestra signed a 300 MW agreement with EnBW in Italy, and Zelestra also signed a 207 MW agreement with Axpo. In addition, a 100 MW tolling agreement was announced in the UK and a 55 MW portfolio agreement in Spain.

In terms of contract structures, revenue swap structures emerged in Spain and Hungary, while merchant revenue optimization agreements with revenue sharing appeared in Germany, Poland, and Denmark. This structural diversification shows the BESS market evolving toward more complex contract models: tolling agreements provide higher revenue visibility for utility-scale projects, while revenue swaps and merchant revenue-sharing models allow owners with higher risk tolerance to retain partial exposure to market upside potential.

Market volatility was primarily driven by developments in the Middle East conflict. Periods of de-escalation and possible ceasefire negotiations temporarily depressed gas prices, while new military escalations and concerns over LNG supply disruptions through the Strait of Hormuz quickly reversed the trend.

Heatwaves across parts of Europe also pushed up cooling demand, while high river water temperatures limited the availability of some French nuclear plants. Drought in Central Europe lowered Rhine River water levels, creating uncertainty for coal transport.