Five highlights from our latest PPA market research

Recently, as part of both our Renewable PPA Market Share and Green Power Forecast reports, we have undertaken research into the renewables PPA market, hearing views from generators, offtakers and other renewables PPA market participants. Our recent Chart of the Week detailed the latest research from our Renewable PPA Market Share report, and now in this blog, we discuss five of the highlights from our research as part of our quarterly Green Power Forecast.

The Green Power Forecast provides a forward view of values achievable for renewables projects from the different revenue streams available for green power. These include captured wholesale prices for different generation technologies, embedded benefit values, renewable subsidy scheme levels and green certificates values. It also details values that can be achieved through a variety of PPA archetypes, and the latest trend in the PPA market for renewables projects.

Wholesale revenue has risen significantly…

Across June – September 2021, forecast all-in green generator revenues increased for a sixth consecutive quarter. Of this all-in revenue, the wholesale element has, unsurprisingly, continued to rise as the trend of record breaking wholesale power prices has prevailed. For context, seasonal power contracts, going out five years, reported in our Green Power Forecast rose by 51.6% on average, quarter-on-quarter.

In the short-term renewables PPA market (i.e. typically for PPAs for <3 years in length), this rise in wholesale power prices has proven lucrative for generators able lock in their PPAs at these elevated levels. Values achieved, however, will depend on the PPA transaction date and the delivery period for the power, with delivery for this winter seeing the highest prices if transacted towards the end of the last quarter.

However, the volatility that has accompanied this surge in wholesale power prices has meant that it has become harder to assess if the highest prices have been secured for PPA deals. Additionally, price cannibalisation—the depressive influence on the wholesale power price at times of high renewables output—continues to have a material impact on captured prices and achieved wholesale revenue for intermittent renewables plant. 

…and other sources of value are up too

While the rise of, and volatility in wholesale power prices dominated our conversations with market participants, another key area of discussion was the rise in other sources of value, namely REGOs and ROCs, but also Embedded Benefits.

As noted in previous Green Power Forecast reports, REGO prices have seen a steady uptick over the past year, and this momentum was not lost over Q321. While our quarterly Green Certificates Survey (the latest of which is currently open for responses) provides an aggregated view on certificate pricing levels, demand and supply trends and sentiment on the future market trajectory, conversations with PPA market participants as part of our latest Green Power Forecast highlighted the scale of REGO price rises seen in recent months. Low wind output over summer 2021, an ever-increasing pressure for energy suppliers to prove their green credentials, and regulatory uncertainty surrounding the future use of continental Guarantees of Origins in GB, has resulted REGO prices rising by ~£1 since early summer. REGOs for current Fuel Mix Disclosure year has reportedly seen the largest rises.

As well as REGO prices, traded ROC values have also increased, also being impacted by the low wind output seen to date in the 2021-22 Compliance Period. Furthermore, expected ROC values for future RO Compliance Periods have risen as BEIS recently set the RO target on suppliers at the second highest ever level for 2022-23.

Embedded benefits have also seen gains over the last quarter, as transmission and distribution loss benefits have increased in line with the gains seen in wholesale power prices.

… but high prices are not good for everyone

On the other side of the coin, high and volatile wholesale prices have been challenging to manage for PPA offtakers, who are seeing both greater levels of risks and costs. Significant swings in forward wholesale power prices during the day, amid with reports of a lack of liquidity in the market, are making fixed price deals more difficult to assess. While, recent experiences of high shaping and imbalance costs, particularly for intermittent technologies and most notably wind assets, have impacted offtakers’ pricing levels for PPAs. Indeed, it was noted that some parties have temporarily withdrawn their offerings for short-term, fixed price deals for wind assets and instead are offering indexed prices.   

… nonetheless, strong competition and liquidity in the short-term PPA market remains

Despite these challenging conditions for the offtake market (and wider energy supply market), the renewables PPA market remains highly competitive; demand for green-backed electricity tariffs remains high, and the number of offtakers that are active in the market remains high also. This has meant that both the number of offtakers active in the market, and the level of bidding activity from such offtakers for individual assets, has stayed elevated. However, some market participants have noted a greater divergence in prices being offered by different offtakers. This may be attributed to differing views on forward wholesale power prices (amid high levels of volatility) and price cannibalisation levels for intermittent renewables, but also more recently due to differing views and approaches to shaping and balancing costs.

While there’s some activity in the long-term PPA market, it remains less liquid than the short term

With AR4 of the CfD opening in less than two months’ time, the main trends noted in the long-term PPA market surrounded developers considering their best route to market options across utility PPAs, the CfD and accompanying PPA, and Corporate PPAs (CPPAs).

However, the long-term PPA market remains notably less liquid than the short term—while there is liquidity for ~5-year fixed price deals, comparatively fewer offtake parties are willing to offer long-term fixed price merchant contracts of 10+ years. While for some, longer-term deals have become easier to secure in light of the sustained rise in wholesale power prices, risk arising from price cannibalisation, and inadequate floor prices still prove significant barriers.

Against this backdrop of high wholesale power prices, CPPA deals remain a relatively more attractive option for corporate buyers, as interest in sourcing green power and meeting ESG targets become more salient. Despite this, and while CPPAs can appear attractive to both corporates and generators alike, finalising a CPPA deal continues to be noted as a lengthy, often difficult process, with a lack of credit-worthy counterparties in the market.

Overall, the renewables PPA market remains dynamic in light of the current high, volatile wholesale power prices, increased demand for green-backed electricity tariffs, and ahead of AR4 of the CfD, and this provides just a snapshot of key trends noted in our latest round of renewables PPA market discussions. If you are interested in hearing more about our coverage of the Renewables PPA market, please contact Tom Ross at

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