Seller's market: Baywa r.e. launches 1st green power tender in Europe

Renewables developer Baywa R.E. AG will launch Europe's first developer-issued tender for corporate power purchase agreements totaling 10 TWh of output, the company said May 6. The energy will come from a portfolio of renewable projects in Germany and Spain.

Bidding will take place in autumn and will see the plants' total output shared between several off-takers in 10-year contracts, Baywa r.e. said. The tender's terms are currently being finalized.

The move comes amid very high demand from corporates for clean power agreements, particularly in Europe. The demand is driven by intensifying sustainability commitments and investor expectations, but is amplified by Europe's ongoing energy crisis.

Baywa r.e. has previously signed agreements across the continent with leading global corporations including Anheuser-Busch InBev SA/NV, HeidelbergCement AG and Nestlé SA.

"This is truly an unprecedented time for energy markets across Europe," said Daniel Parsons, BayWa r.e.'s head of power purchase agreements, in a statement. "Corporates are facing price spikes and increasing uncertainty, and at the same time they want to play an active role in tackling the climate crisis. Renewable energy is the only answer."

Power buyers have already shown willingness to pay higher prices in recent months as market prices for power purchase agreements surged across technologies and geographies, further evidencing a pivot to a seller's market.

"The price rises have been a wake-up call for many corporates," Benedikt Ortmann, global director of solar projects at BayWa r.e., told S&P Global Commodity Insights in March. "We see ourselves being overwhelmed with requests for [power purchase agreements]. We simply don't have enough projects for that."

Deals have been renegotiated as prices rose over the course of the agreement process. One seller recently disclosing this was Portugal's EDP Renováveis SA, whose CEO Miguel Stilwell de Andrade said in February that the company was renegotiating its power deal prices, adding that green off-take agreements remained cheaper than buying power on the wholesale market.

By running the tender, Baywa r.e. wants to introduce a deal-making model that can support high volumes in a balanced way for both buyers and sellers operating in a volatile market, Parsons said.

"We are also seeing the price volatility in the current market environment. As we are offering long-term contracts from 2025 we should see less volatility in [this tender]," said Parsons in a May 6 email.

"We are running this tender as we believe the market is turning and we want to make a substantial offer to the CPPA market that was dominated by [requests for proposals] from buyers."

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.