Ahead of next week’s Renewables Procurement & Revenue Summit, our colleagues from PV Tech Premium spoke to senior manager of PPA origination and structuring at EDF UK Ross Irvine on the UK Contract for Difference (CfD) and Power Purchase Agreement (PPA) markets for solar projects.
“Government CfD is currently the main route to renewables,” says Irvine, echoing industry sentiment that securing a government contract remains the most attractive option for most solar developers. “It is attractive for investors in sustainable energy [with] 20 years of 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; In fact, Irvine suggests that owners of operating assets may find them particularly attractive as they provide routes to market for projects that are already at such an advanced stage of development that they have already faced challenges such as delay risks.
“The corporate PPA market may have calmed down a bit for new build assets, but that presents an opportunity for operational assets,” says Irvine. “We see many corporate buyers coming to EDF looking for corporate PPAs with a term of five to ten years, specifically for operational assets, which avoids the risk of delay because you know exactly when [those assets] will be available, so there is no risk of them arriving two years late, which can often be the case with new construction locations.”
Fundamentally, many of these investment decisions in operational assets are financially sound: the lack of delay risk, no need to go through costly and lengthy licensing procedures and minimal capital investment all help to improve the financial attractiveness of a corporate PPA, compared to a CfD.
This is particularly important in Britain, where contracts on a generation of renewable energy projects are set to expire in the 24th year of the Renewables Obligation (RO) scheme. Irvine says many of these projects will need to move to a corporate PPA to continue to operate and deliver Renewables Obligation Certificates (ROCs) as “many of the other benefits are still in place” for these types of operational assets.
“They are coming to an end and will be phased out between 2028 and mid-2030,” Irvine explains. ‘They have to make a decision [as to] whether they continue to operate the assets, how they operate the assets… and they are looking for that next piece of certainty: ‘can I get guarantees that will cover my operating costs, which will allow me to continue?’
Read the full interview on PV Tech Premium here.
Irvine will also speak next week Summit on Procurement and Income from Renewable Energy Sourceswhich will be held in London from May 20 to 21. Organized 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.
