Merchant Market Desk
Managing risk through power purchase agreements
Joakim Johnsen
Head of Merchant Market Desk
Energy & Infrastructure EMEA
Off-takers are not just buying renewable PPAs because they are competitive on cost, but as an opportunity to grow their business in a responsible and sustainable manner.

Managing risk through power purchase agreements

The costs of generating renewable energy are constantly decreasing due to highly efficient technologies. With the phasing out of feed-in tariffs and the growing demand from corporates for green energy, the need for long-term power purchase agreements (PPAs) is on the rise. These not only provide institutional investors with greater planning security but also ensure stable cash flow over the long term. Over the past five years, the use of PPAs in the renewable energy sector has therefore grown rapidly, especially in countries with limited subsidies.

Comprehensive market knowledge and a solid network are the basis for our forward-looking PPA strategy, so that a suitable, individually tailored PPA structure is usually already available when a transaction is concluded. Long-term power purchase agreements are now an important instrument for managing energy risks. Using quantitative analyses, hedging routes are developed in advance for the entire duration of the project, and suitable buyers are acquired to realise a project. Energy production by wind, solar and hydropower is subject to strong fluctuations due to weather dependency. PPAs hedge the resulting volatility of market prices over the long term and provide investors with stable returns.

We have many years of expertise in the PPA market. Over the past five years, our experts have negotiated, structured and concluded PPAs for a total output of over 1,200 MW1. Our team of dedicated employees – brought together thanks to the company’s own Merchant Market Desk – are responsible for sourcing and structuring PPAs for all projects throughout Europe. Together with the respective transaction team, the Merchant Market Desk always develops an optimal PPA structure for the project duration of individual projects or for entire portfolios.

1) as at 01.12.2019

Renewable Energies

Power Purchase Agreements

Ninetynine Seconds - Joakim Johnsen on Power Purchase Agreements

In the last five years, Europe has seen significant growth in the use of PPAs for renewable energy. This is largely due to decreasing costs of renewable energy generation, phasing out of feed-in-tariffs as well as growing corporate demand for green energy. Although PPAs are used in several countries across Europe, the majority are concentrated in just a few, where subsidies are limited. However, demand is spreading across the region and several renewable energy projects are seeking PPAs in order to become realised.