The Italian long-term Power Purchase Agreement (PPA) market is experiencing a notable slowdown. According to Álvaro de Simón, an independent renewable energy consultant, this phenomenon is driven by a combination of economic and regulatory factors that affect both prices and investor confidence.
«In Italy, the PPA price ranges between 65 and 70 euros per MWh, significantly higher than in other markets such as Spain, where prices are around 35-40 euros,» explains de Simón in an interview with Energía Estratégica España. This difference is largely due to the lower degree of decarbonization in the Italian energy mix and the impact of natural gas on marginal prices.
The role of the FER X decree in the PPA trend
A key factor in the market slowdown and in PPA signing is the expectation generated by the FER X decree, which will establish an auction mechanism for solar projects. This decree promises to set an initial «strike price» of approximately 85 euros per MWh, which has led to a wait-and-see attitude among sector players. «No one wants to sign a PPA under less favorable conditions if the decree offers better opportunities. This has slowed down the market and created significant distortions,» de Simón details.
The consultant emphasizes that this dynamic reflects an inherent characteristic of the Italian market: regulatory changes often take time and create uncertainty. In this case, until the FER X decree is fully published and approved, it is unlikely that the momentum in PPA signing will recover.
It is important to remember that the regulation is still in draft form and its final version is not yet known, which generates higher expectations in the renewable sector.
Guarantees of origin: a pending challenge
Another factor influencing contract signing is the growing demand for Guarantees of Origin, a requirement increasingly common to demonstrate the sustainability of projects. However, according to de Simón, the market for these guarantees still faces significant challenges. «The main problem is that the prices of guarantees do not reflect their real value, and the regulation needs to mature to define clear and logical criteria,» he points out. Currently, prices are typically set around one euro per megawatt, which does not adequately reflect the importance of these certificates in renewable energy projects.
Furthermore, the need to ensure additionality, meaning that guarantees are linked to new and sustainable projects, adds a layer of complexity to the market. The consultant believes that this aspect still requires more regulatory sophistication to meet the growing demand for corporate sustainability.
Cross-border PPAs: a growing opportunity
Despite the difficulties in the local market, de Simón points out that cross-border PPAs are emerging as an attractive opportunity for large energy consumers, especially tech companies, and there is significant interest in these types of contracts. These agreements allow the purchase of renewable energy from more competitive markets, such as Spain, without the need for a physical connection to the asset.
«Large tech companies are demanding huge volumes, hundreds of GWh per year, especially for their data centers. They are energy-intensive, have a 24/7 consumption profile, and require huge energy procurement,» explains the specialist, noting that many opt for multi-country structures that take advantage of the competitive advantages of each market.
Spain, with its competitiveness in solar technology, is positioning itself as a key supplier in these schemes. According to de Simón, this model makes sense from a market logic standpoint: «These phenomena, given the consumption scale of many of these companies and their multinational nature, are clearly types of contracts that will continue to grow, and cross-border structures will be sought,» he adds.
However, he points out that regulatory and contractual aspects add considerable complexity.
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