More companies than ever are setting ambitious green targets based around a switch to renewable energy, meaning Europe’s policymakers and regulators must act now to make that move as easy as possible for large and small businesses alike – or risk losing a golden opportunity to help meet decarbonisation goals.
First the good news. Europe’s corporate power purchase agreement (PPA) market is finally showing signs of lift-off. From the first PPA signed in 2014, more than 15GW has now been announced, including a record 4GW last year.
But we believe corporates are only just getting started, and important policy and regulatory gaps remain to be filled to help corporate sourcing realise its full potential.
The EU has increased its ambitions, committing to reduce greenhouse gas emissions by 55% by 2030 and to reach climate neutrality by 2050. We believe corporate sourcing can play a central role in reaching these targets.
The current review of the EU Renewable Energy Directive (RED II) is an opportunity to remove more barriers to corporate procurement. We have already seen positive developments from some countries. Norway has established a public credit guarantee scheme for PPAs and Spain approved a similar programme last year. Other countries, such as Romania, Bulgaria, and Lithuania, recently approved legislation to remove barriers to corporate PPAs.
These initiatives are to be applauded, and the implementation of RED II later this summer should bring about more necessary developments. For example, now is the time to improve the framework around Guarantees of Origin (GO). GOs are a tracing mechanism that allow companies to verify their renewable energy consumption.
Unfortunately, some European countries do not issue GOs to all renewable producers. GOs should be given to all forms of renewable production, to enable a clear link between renewable production and consumption.
To ensure there is enough renewable energy supply to meet demand, project permitting processes must also be streamlined, while maintaining environmental standards. As Giles Dickson, WindEurope CEO said: “The rules and procedures are too complex. There aren’t enough staff to process the permit applications.”
Here, we are seeing progress in some countries. Spain approved a decree last year to facilitate access and connection to the electricity transmission and distribution grids. Other countries must follow suit.
In addition to the policy actions above, there are ways the European corporate PPA market can evolve to include more buyers.
For smaller buyers, aggregated PPAs can be useful. With this model, a consortium of buyers contracts with one or more renewable projects. Aggregated PPAs can help buyers to leverage their combined expertise and demand to achieve economies of scale. The aggregated PPA has only been used in a handful of European countries so far (Finland, the UK, the Netherlands and Denmark) but we see potential in additional markets.
Understanding that corporate PPAs can be complex, particularly for smaller companies without in-house expertise, we believe the market will also expand with the help of materials like the template PPA contract co-developed by RE-Source and EFET.
The contract, available in several European languages, is one of many free resources available on the RE-Source Platform’s Buyers Toolkit. The Toolkit is designed to be helpful to both companies and their supply chains in decarbonisation efforts.
By introducing critical policy and regulatory updates and facilitating the market to make corporate PPAs easier to sign, a greater diversity of companies will be able to enjoy the benefits of renewable energy. This will turbo charge the next stage of corporate PPA development in Europe: widening the market, removing barriers to entry, and helping to propel the bloc towards its 2050 climate targets.
- Hannah Hunt is impact director at RE-Source
RE-Source’s annual live conference is to resume this year, with the event set for 13-15 October in Amsterdam, the Netherlands