Table of Contents
Introduction
The Global Power Purchase Agreement (PPA) Market is anticipated to grow from USD 28.3 billion in 2023 to around USD 35.3 billion by 2033, with a robust Compound Annual Growth Rate (CAGR) of 31.7%. This growth is driven by the increasing corporate demand for clean energy, as reflected by significant procurement deals by major companies across various sectors. In 2022, top corporations like Amazon, Meta, and Google signed substantial clean energy agreements, emphasizing the market’s potential and the strategic importance of PPAs in ensuring energy security and sustainability.
However, the market faces several challenges. Supply chain disruptions and geopolitical tensions, particularly those affecting energy-rich regions, have led to fluctuating fossil fuel prices and complicated the financial planning for renewable projects. This instability makes long-term PPAs less predictable and can deter potential investors. Moreover, regulatory changes and the need for currency risk management further complicate the market landscape.
General Electric has been actively enhancing its capabilities and presence in the PPA market through various initiatives and projects, although specific recent developments in 2023 were not detailed in the sources reviewed. Siemens AG has entered into a Memorandum of Understanding (MoU) with Shell to develop low-carbon, highly efficient energy solutions, particularly focusing on green hydrogen projects. This partnership aims to accelerate the energy transition and improve sustainability in energy consumption across industries.
Shell Plc has made several strategic moves: In January 2023, Shell USA, a subsidiary of Shell Plc, signed a definitive agreement to acquire Volta Inc., which includes a significant public EV charging network. This acquisition valued at approximately USD 169 million, aims to enhance Shell’s capabilities in electric mobility and energy solutions.
Despite these challenges, the market has seen impressive recent developments. In 2023, Europe marked a record year with over 16.2 GW of contracted renewable power, highlighting the region’s accelerating shift towards sustainable energy solutions. This was complemented by innovative agreements like hybrid PPAs, which combine power generation with energy storage to enhance grid stability and project viability.
Key Takeaways
- In 2023, the global Power Purchase Agreement Market was valued at USD 28.3 Billion.
- The global Power Purchase Agreement market is projected to grow at a CAGR (Compound Annual Growth Rate) of 31.7% between 2024 and 2033.
- By type, the Virtual PPAs held a major market share of 59.2% in 2023.
- By Location, the off-site segment dominated the global market with an 83.1% market share in 2023.
- By Category, the Corporate segment accounted for 86.3% of the global market.
- Based on the deal type, the wholesale segment led the market with a 62.5% market share in 2023.
- By Capacity, the 50-100 MW segment dominated the market in 2023, accounting for over 49.6% market share.
- By application, the wind segment accounted for the fastest growth, accounting for 51% CAGR during the forecasted period.
- Based on the end-user, the Commercial segment dominated the market with more than 50% market share in 2023.
- In 2023, North America dominated the market with the highest revenue share of 40.7%.
- In 2022, According to the American Public Power Association, 7 gigawatts (GW) of offsite projects were supported by power purchase agreements signed by more than 167 companies.
- Australia’s Renewable Energy Target (RET) influences PPAs by setting targets for electricity generation from renewable sources. For instance, the country has set a national renewable electricity target of 82% by 2030.
Power Purchase Agreement Statistics
- The global market for Power Purchase Agreements (PPAs) is very dynamic. According to BNEF, it grew by 21% in 2021, 32% in 2022, and 12% in 2023.
- According to Pexapark, 16.2 GW of PPA contracts were signed in Europe in 2023, representing a 41% growth compared to 2022.
- These contracts are primarily based on solar plants (65%), onshore wind farms (14%), and offshore wind farms (12%).
- In total, 272 contracts were signed in Europe in 2023, with an average volume of nearly 60 MW per contract.
- This means: if the plant operator consumes less than 50% of the created electricity itself
- Therefore, people are motivated to stay below the limit and not install 300 kWp or more within 12 months.
- A PPA enables a large roof-top system larger than 300kWp-cap to be financeable.
- Greenfield Power Purchase Agreement Market (Greenfield PPAs) are already often an ideal solution for new green energy facilities with a capacity of 20 MW or more.
- This document provides the evidence that the electricity is 100% green
- As it can be seen just only 3% of respondents have a high level of knowledge, the rest being split in half between medium/advanced (51%) and beginner/none persons who have any knowledge about PPAs (46%).
- Regarding the attitude toward PPAs, it has been found that 85% of the respondents are firmly in favor of signing such contracts
- From what it resulted, most of the interviewees (64%) agree that PPAs will help the transition to green energy, but together with the help of other factors.
- As far as the contractual period we can observe that most of the examined (51.6%) wish to sign these contracts for a short period, namely 1-5 years while a longer period is thought suitable for 25.5% of the respondents
Emerging Trends
- Hybrid PPAs: These agreements, which combine traditional power purchase agreement market with battery storage solutions, are becoming increasingly popular. This approach not only enhances grid stability but also offers more predictable energy outputs, making renewable energy sources like solar and wind more reliable and appealing to corporate buyers.
- Shorter-term Agreements: There’s a growing shift towards shorter-term PPAs, partly driven by the volatile energy market and the rapid technological advancements in the energy sector. These shorter contracts provide flexibility for buyers to adapt to market changes and technology improvements more swiftly.
- Stable Pricing Windows: Recent market conditions have led to more stable PPA prices, presenting a window of opportunity for buyers. This stability is attributed to factors like lower natural gas prices and an abundant supply of solar modules, which have helped temper the previous volatility seen in PPA pricing.
- Corporate Clean Energy Procurement: There is a significant increase in corporate procurement of clean energy through PPAs. Companies, particularly tech giants, are aggressively adding renewable energy to their portfolios to meet sustainability goals. The drive for 100% renewable energy, especially among RE100 companies, underscores this trend.
- Geopolitical and Economic Influences: The broader geopolitical and economic environment, including trade policies and material costs, continues to impact PPA pricing and availability. For instance, upcoming changes in trade restrictions and tariffs could affect solar panel costs, potentially influencing future PPA agreements.
- Innovative PPA Structures: The market is also seeing innovation in PPA structures, including aggregated PPAs that allow smaller enterprises to pool their purchasing power. This approach democratizes access to renewable energy procurement, enabling more companies to participate in the market and achieve economies of scale.
Use Cases
- Corporate Procurement: Corporations globally are increasingly adopting PPAs to meet sustainability goals and manage energy costs. In 2023, a record high of 46 GW of solar and wind PPAs was announced by corporations, driven by favorable economics and corporate clean energy targets. This trend is particularly strong in Europe where corporate PPA volumes grew significantly.
- Community Energy Projects: PPAs can facilitate community energy projects by enabling local groups to purchase power directly from renewable sources. This can help communities become energy self-sufficient and reduce carbon footprints while supporting local renewable projects.
- Greening Public Infrastructure: Governments and municipalities use PPAs to source clean energy for public infrastructure, reducing public sector carbon emissions and promoting local renewable energy industries.
- Stabilizing Energy Costs for Non-profits: Non-profit organizations, which often can’t capitalize on tax credits for renewable energy, can benefit from PPAs. By locking in lower energy prices through a PPA, non-profits can manage their operating costs more effectively over the long term.
- Virtual PPAs in Deregulated Markets: In deregulated markets, where physical delivery of electricity isn’t required, virtual PPAs are popular. These financial agreements allow off-takers to claim environmental attributes of the renewable energy generated elsewhere, providing flexibility and risk mitigation benefits.
Key Players Analysis
In the Power Purchase Agreement (PPA) sector, General Electric (GE) through its business unit GE Vernova, has been proactive in embracing renewable energy solutions and the broader transition to decarbonized energy systems. GE Vernova, which emerged from the restructuring of GE’s energy businesses, focuses on accelerating the electric transformation of the world’s energy infrastructure. This includes the deployment of renewable and clean energy technologies such as wind and solar power systems, which are central to PPAs focusing on sustainability.
Siemens AG is also significantly engaged in the PPA sector, particularly through collaborations that enhance renewable energy use and efficiency. For instance, Siemens has entered into agreements focusing on low-carbon, highly efficient energy solutions, including the development of green hydrogen projects with Shell. These initiatives are part of Siemens’ broader strategy to support the energy transition and offer cleaner energy solutions, reinforcing its role in PPAs that cater to industrial and corporate sustainability needs.
Shell Plc has been active in securing long-term Power Purchase Agreements (PPAs) to bolster its renewable energy portfolio. Recently, Shell signed a 15-year PPA with HANSAINVEST Real Assets for 600 MW from Germany’s largest solar project, aiming to supply Microsoft with a significant portion of this capacity. This move underscores Shell’s strategic focus on expanding its renewable energy offerings and supporting its clients in achieving their sustainability goals. Shell is also involved in the world’s largest offshore wind farm, Dogger Bank, where it will supply UK customers with renewable energy, further emphasizing its commitment to enhancing clean energy access.
Statkraft, Europe’s largest generator of renewable energy, plays a pivotal role in the PPA sector by leveraging its extensive expertise to facilitate the integration of large-scale renewable projects across various markets. Although specific recent developments in 2023 were not detailed in the sources reviewed, Statkraft’s consistent involvement in renewable energy trading and market operations highlights its commitment to shaping a sustainable energy future through strategic PPAs and other renewable energy initiatives.
Fairdeal Greentech India Pvt. Ltd.: There wasn’t specific recent information available on Fairdeal Greentech India Pvt. Ltd. regarding their current activities in the Power Purchase Agreement (PPA) sector. They might be involved in projects locally, but these have not been documented in the accessible resources or major news outlets recently.
Ameresco: Ameresco is actively engaged in the Power Purchase Agreement sector, focusing on sustainable energy solutions. In recent developments, Ameresco has been involved in significant projects such as installing a large-scale battery energy storage system for Silicon Valley Power. This project, set to enhance electrical system reliability and integrate renewable energy, showcases Ameresco’s commitment to advancing clean energy infrastructure. Additionally, Ameresco has collaborated with entities like Colorado Mountain College and Holy Cross Energy on projects that align with both educational and environmental goals, further emphasizing their role in promoting sustainable energy through innovative PPAs.
RWE AG is significantly engaged in the Power Purchase Agreement (PPA) sector, notably through its contract with Lidl and Kaufland to supply 250 million kilowatt hours of renewable energy annually from its Kaskasi offshore wind farm. This PPA is a testament to RWE’s commitment to expanding its renewable energy portfolio and supporting major retailers in their climate targets.
Enel Global Trading, part of the Enel Group, actively participates in the Power Purchase Agreement market, leveraging its extensive renewable energy assets to supply sustainable power solutions. They focus on integrating renewable energy into the grid and supporting corporate clients with sustainable energy procurement, emphasizing their strategic role in the transition towards a cleaner energy future.
Ecohz actively supports businesses in utilizing Power Purchase Agreements (PPAs) to stabilize their electricity costs and support renewable energy projects. Ecohz’s PPA Advisory service guides companies from selecting suitable renewable projects to negotiating PPA terms that balance clean energy goals with financial objectives. Their expertise also extends to managing Energy Attribute Certificates (EACs), which are crucial for documenting renewable energy consumption under PPAs.
Iberdrola, S.A. is actively expanding its role in the Power Purchase Agreement (PPA) sector, particularly in the renewable energy field. For example, Iberdrola has secured a significant agreement to provide 250 million kilowatt hours of renewable energy annually to Lidl and Kaufland from its Kaskasi offshore wind farm. This initiative is part of Iberdrola’s broader strategy to support major retail chains in achieving their sustainability targets, demonstrating the company’s commitment to renewable energy development and climate goals.
Renew Energy Global PLC is making notable strides in the Power Purchase Agreement sector, particularly by facilitating renewable energy adoption. In the fiscal year 2023, Renew Energy signed numerous PPAs, including a substantial agreement with Gujarat Urja Vikas Nigam Limited for 400 megawatts of capacity. This is part of Renew Energy’s broader initiative to support India’s transition to a sustainable energy future, highlighting its role as a major player in renewable energy within the region.
Drax Energy Solutions Limited is prominently engaged in the Power Purchase Agreement (PPA) sector, offering tailored solutions to meet the renewable energy needs of businesses. Drax’s approach to PPAs is comprehensive, providing options for fixed, flexible, and bespoke contracts to suit various operational needs and commercial requirements. This flexibility allows businesses to secure energy at competitive prices while contributing to their sustainability goals. Drax emphasizes customization in its service offerings, ensuring that each PPA supports the client’s journey toward carbon reduction and energy efficiency.
Conclusion
Power Purchase Agreement Market have become a cornerstone in the transition towards renewable energy, offering a structured and effective means for diverse entities—from multinational corporations to small communities—to secure long-term, cost-effective, and sustainable energy supplies. In 2023, the market witnessed substantial growth with record-high corporate engagements, demonstrating the robust appetite for renewable energy driven by economic benefits and sustainability targets. As the energy landscape continues to evolve, PPAs stand out as pivotal instruments, not only facilitating the expansion of renewable energy projects but also stabilizing energy costs and contributing to environmental goals. Their adaptability across various market conditions and regulatory environments underscores their potential to significantly influence future energy strategies and sustainability efforts globally.
Discuss Your Needs With Our Analyst
Please share your requirements with more details so our analyst can check if they can solve your problem(s)
