Decrease in renewable PPAs is a bad signal for Europe’s competitiveness and energy security

Europe’s Power Purchase Agreement (PPA) market slowed down this year. The number of deals signed has dropped by 60% compared to the same period last year, while contracted capacity is down 40% relative to 2024.

This slowdown is very paradoxical. Europe has no path to energy security and competitiveness unless it electrifies its economy – shielding itself from energy shocks and leveraging large scale deployment of wind and solar energy.

But the market is facing headwinds.

Grids – Europe is not building out its grid and storage infrastructure fast enough. Grid permitting is among the main bottlenecks for the expansion of renewables today. Hundreds of GWs of renewables projects await grid connection.

Permitting – Renewables permitting also remains too slow. 26 EU Member States are in breach of EU legislation for not applying the EU permitting rules set out in the Renewable Energy Directive.

Electrification – Europe is not electrifying fast enough. Direct electrification is the cheapest and most efficient way to decarbonise. It’s central to our competitiveness and energy security. But Europe is falling behind: electrification rates are stagnating in Europe.

Negative prices – Growing hours of negative prices are making PPA negotiations harder, highlighting the urgent need for storage solutions that will deliver in the short-term.

PPAs drive decarbonisation and competitiveness

The Clean Industrial Deal rightly names PPAs as a key solution. Without them, we risk losing industrial competitiveness – and missing our climate targets. PPAs are not just a compliance tool, they are a cornerstone of Europe’s industrial decarbonisation.

PPAs give companies price certainty. They help new wind and solar projects get financed and cut buyers’ exposure to volatile energy markets.

The EU is doubling down on PPAs

Earlier this year the European Commission published its revised State Aid framework to support the Clean Industrial Deal (CISAF). National Governments can now offer temporary relief on electricity prices for electro-intensive industries conditional on investing in renewables, storage or direct electrification, for example via PPAs.

Additionally, the European Investment Bank (EIB) is launching a €500m pilot programme to support corporate PPAs aimed at mid-sized companies.

The European Commission has also initiated the idea of tripartite contracts for offshore wind and hybrid solar & battery projects. They allow governments to come in as a third party to share risks and reduce costs on both sides – for the producers of renewable electricity and the corporate offtakers.

Europe’s businesses want clean power. Europe wants energy independence and competitiveness. Let’s make it happen.