EU revenue cap threatens PPA market – analysts

By TASMIN CHOWDHARY, Montel

European Commission plans for a revenue cap of EUR 180/MWh on power generators may stifle new power purchase agreements (PPA) and cause volumes to fall further next year, experts said at the RE-Source conference.
“It’s the exact opposite of what we need to get the ball rolling,” said Nick Keramidas, director of EU and regulatory affairs at Greek metals and energy producer, Mytilineos.

“PPAs this year and particularly in 2023 onwards are going to drop unfortunately”, because of the EU’s temporary intervention, he added.

“Leaving the option for the member states to deviate from what the European Commission sets out, that’s where the uncertainty comes from,” Andor Savelkouls, Altenex’s Senior Director told Montel at the conference in Amsterdam.

The intervention meant previous power price models for the coming year would be redundant, making forecasts for the typical 10-year or longer period of a PPA even more challenging, said another expert.

Last week, the EC approved measures targeting revenues of low-cost power producers who are benefitting from soaring market prices, excluding gas and hard coal generators. It plans to redistribute the funds to support consumers struggling with high energy bills this winter.

RE-Source data showed 2022 would see the first drop in PPA volumes for nine years in a sign of market stagnation, mostly due to uncertainty caused by volatile energy markets and Russia’s war in Ukraine.

“Killing the market”

Keramides urged the EC to ensure the regulation would exclude all PPAs, otherwise it would “literally kill” the market.

Projects in the pipeline risked not reaching the final investment decision stage under the new rules, which restricted available supply in the mid-term, added Savelkouls.

For more insights, visit the full article by Montel.