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Hamburg Commercial Bank Study: Power Purchase Agreements – Green energy for corporate consumers

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Hamburg Commercial Bank Study: Power Purchase Agreements – Green energy for corporate consumers

CCO Nicolas Blanchard

HAMBURG – The trend towards green energy is becoming increasingly important. Not only companies and their employees, but also customers are questioning their own carbon footprints more and more critically and are turning to renewable energy sources. However, since classic suppliers cannot always meet these wishes with their offered power mix, individual power purchase agreements (PPAs) as a link between the green power source and the buyer are an innovative solution that is gaining in importance.

In its current study update “Corporate PPA – Green energy for corporate consumers”, Hamburg Commercial Bank (HCOB) presents how the market volume has developed in recent years and in which countries PPAs have already become established. The authors of the study also shed light on the extent to which the European PPA market will be influenced by the effects of the COVID-19 crisis in the short term and forecast how the development in this special energy segment will continue. In addition, different variants of power purchase agreements and their respective modes of operation are presented.

Impact felt through COVID 19 pandemic

The COVID-19 pandemic has had a significant impact on the PPA market not only on the supply side – many projects have been and will be shifted into the future – but also on the demand side. This is because electricity prices in Europe have fallen sharply in the meantime in some cases and customers are acting more cautiously due to the dynamic development during the pandemic. Nevertheless, the HCOB analysts see good prospects for power purchase agreements in the long term, as the significant decline in government subsidies makes it increasingly important to secure income (“cash flow”) through long-term power purchase agreements. The challenge is to find exactly the right PPA partner for the individual projects, with their diverse terms and conditions, the analysts say.

“This is precisely where Hamburg Commercial Bank supports its clients by bringing them together with project developers, institutional investors and banking partners. After all, we have been active in project finance for sustainable energy generation for decades and are therefore very well networked in the industry,” said Dr. Nicolas Blanchard, Chief Clients and Products Officer of Hamburg Commercial Bank. “In our view, PPAs remain an important growth market, as they enable companies to cover their energy needs via renewable energies. For us, sustainability also means future viability, so we are happy to support our clients in this future sector with know-how and expertise.”

Revised EU regulation facilitates sales and brings further potential

So far, it is mainly large companies that use PPA contracts, as they are often very complex and individually tailored. According to HCOB analysts, they will receive a further boost from “RED II”. This revised EU directive on the promotion and support of renewable energies will make it easier to use PPA in Europe for new renewable energy projects from 2021 onwards, as it expands the possibilities for direct marketing of green electricity by means of PPAs.

Further information on the topic and a reading sample of the study update “Corporate PPA – Green electricity for corporate consumers” are available on our homepage.

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