Pexapark, a provider of software and advisory services for post-subsidy renewable energy sales, has supported three German independent power producers (IPPs) by signing five short-term power purchase agreements (PPAs) as power prices soar to all-time highs in Germany.
Short-term PPAs in Germany are rising in prominence as a means of hedging the myriad of risks posed by the continual shift of Germany’s renewable energy industry into to a post-subsidy market, following the phase out of Feed-in Tariffs backed by the Erneuerbare-Energien-Gesetz (EEG).
Pexapark is currently working with independent power producers (IPPs) by offering them easy to transact and highly standardised PPAs, that enable them to capitalise on favourable market conditions.
According to PexaQuote data, prices for three-year PPAs topped EUR60 per MWh in August 2021, while the prices being commanded for one-year PPAs were at almost EUR70 per MWh, having been on a steep upward trajectory since the Autumn of 2020, when the cost of power was just under EUR34 per MWh.
Jonas Nihoj, Head of Portfolio and Trading Services, Pexapark, says: “With German power prices being driven to their highest level in more than a decade by commodity prices, now is the time for IPPs to be securing their prices, and to take advantage of the historically very attractive prices. We have the experience to assist IPPs now looking at crossing the bridge from the old world of EEG into the new world of energy trading – but the window of opportunity for negotiating such good prices could quickly narrow.”
The PPAs signed are with a leading utility offtaker, covering five mature onshore wind projects with an average age of 20 years, and are designed to mitigate commercial and operational risks. These PPAs protect against potential power price downsides and offer certainty for investors by providing a fixed level of power price per MWh as the market transitions.
At the same time, according to a study by Swiss energy company Alpiq, it is estimated that almost a quarter of onshore wind farms in Germany are reaching the end of their subsidised lifetime. These ageing projects will soon be exposed to merchant risk and will require new business models to continue their operational lifetime.
Closing short-term PPAs is a core part of making lifetime extension financially worthwhile in these new market conditions, while providing cover for technical risks and attracting further investment.
Pexapark has a long track record in advisory services for PPAs and now that experience is being utilised as part of a new ‘Trading as a Service’ offering that supports IPPs in closing out PPAs quickly, while overcoming the various challenges they face, such as negotiating contracts and obtaining quotes.
The service is aimed at speeding up that process; contracts are already written, negotiated and the Request for Quote (RFQ) process is expedited through Pexapark’s existing suite of tools and services.
Jonas adds: “Many IPPs will not have the experience in negotiating PPAs when emerging from the EEG world. But we can support with expertise, so that they can be confident the contractual terms will be the best, designed to mitigate their energy risks. Short-term PPAs, such as those we have supported on through our new trading services offering, can help reduce the financial risks of operating aging wind farms out of subsidy and will provide greater optionality around asset lifetime extension decisions. Ultimately, it will enable them to keep important generating capacity online and optimise their portfolio.”
Pexapark is exhibiting at HUSUM Wind at Messe Husum and Congress on 14-17 September at stand 4A22. Its advisors will be on hand to offer market insights and discuss current opportunities for securing prices.
