European PPA index falls 11.3% in June as cost, risk discounts escalate: Pexapark

Cost and risk-related discounts along with falling wind and solar capture price projections contributed to an 11.3% month-on-month decrease in Pexapark's composite European PPA price index in June, PPA platform Pexapark said July 27 in its latest monthly market report.

Normally rising forward power curve prices would lift PPA market prices, but risk discounts and hedging costs were also rising, leading to a decrease in most Pexapark price indices in the range of 7% to 24%, it said.

Further, "we have materially revised downwards our projections for future capture rates of offshore wind, and we assume higher future cannibalization for Nordic onshore as well as Italian solar (ie a more rapid decline of future capture factors), on the back of higher expected build-out rates," said Pexapark head of analysis Dominique Hischier.

PPAs signed in June amounted to around 980 MW of capacity, Pexapark calculated, with six of 10 deals relating to solar projects.

The biggest was Statkraft's 2 TWh/year deal with Sweden's H2 Green Steel, for delivery of hydropower in northern Sweden from 2026 to 2032 to an 800-MW electrolyzer facility at H2 Green Steel's Boden plant.

"Cheap renewable electricity in northern Sweden is particularly attractive for upcoming energy-intensive industrials," Pexapark said.

Besides H2 Green Steel, the region hosts Hybrit, a joint venture between SSAB, LKAB and Vattenfall. The group is adapting SSAB's steel manufacturing nearby Lulea to use hydrogen for commercial green steel production by 2026.

Four of the 10 deals, meanwhile, were for Danish solar, with IPP Better Energy signing three of them, the largest of which with telecoms companies Telia and Telenor for 125 GWh/year.

Denmark has doubled its solar capacity in five years to around 1.5 GW.

Despite limited northern European sunshine, Danish solar capture price factors "remain high and solar profiles provide a good complementarity to the prevalent wind generation, making solar developments and PPAs cost competitive and interesting for offtakers in Denmark," Pexapark said.

10-YEAR PPA INDEX PRICES (Eur/MWh)