Ahead of next week’s Renewables Procurement & Revenue Summit, our colleagues at PV Tech Premium spoke with senior manager of PPA origination and structuring at EDF UK Ross Irvine about the UK’s Contract for Difference (CfD) and power purchase agreement (PPA) markets for solar projects.
“The government CfD is the main way of renewables getting built right now,” says Irvine, echoing industry sentiment that securing a government contract remains the most attractive option for most solar developers. “It’s attractive to renewable investors [with] 20-year fixed-price certainty, with a government-backed entity.”
However, this is not to say that there is no demand for corporate PPAs in the UK; indeed, Irvine suggests that operational asset owners can find them particularly attractive, as they provide routes to market for projects that are already at such an advanced stage of development to have already dealt with challenges, such as delay risk.
“The corporate PPA market might have quieted off for new-build assets, but that leaves an opportunity for operational assets,” says Irvine. “We’re seeing loads of corporate buyers come to EDF looking to source five-to-ten-year corporate PPAs specifically for operational assets, which avoids delay risk as you know exactly when [those assets] are going to be available, so there’s no risk of them being two years late, which often they can be for new-build sites.”
Fundamentally, many of these investment decisions in operational assets make sound financial sense: an absence of delay risk, no need to engage in costly and lengthy permitting processes and minimal capex investment all help improve the financial attractiveness of a corporate PPA, compared to a CfD.
This is particularly significant in the UK, where a generation of renewable energy projects are coming to the end of their contracts in the 24th year of the Renewables Obligation (RO) scheme. Irvine says that many of these projects will have to transition to a corporate PPA in order to continue to operate and deliver Renewables Obligation Certificates (ROCs) as “a lot of the other benefits are still there” for this kind of operational asset.
“They’re coming to the end and being phased out between 2028 and the mid-2030s,” explains Irvine. “They’ve got a decision to make [as to] whether they continue to operate the assets, how they operate the assets … and they’re looking for that next bit of certainty to go: ‘can I have assurances that cover my operating costs, which allow me to keep going?’”
Read the full interview on PV Tech Premium here.
Irvine will also be speaking at next week’s Renewables Procurement & Revenue Summit, to be held from 20-21 May in London. Hosted by our publisher Solar Media, the event will cover PPA design, tackling high energy prices and more; for more information, including the full agenda and ticket options, visit the event website.
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