Market players and politicians agree: To ensure a robust expansion of renewables in the future, there must and will be more private-sector market mechanisms. As a result, there will be fewer tenders and feed-in tariffs, and more direct power purchase agreements (PPAs) between electricity suppliers and consumers.
In a PPA, the two parties contractually agree on the amount of electricity to be supplied at a fixed price, usually for a period of five to 20 years. The number of companies looking to source as much renewable power as possible through green PPAs is growing steadily. According to the PPA platform RE-Source, renewable PPAs with a total capacity of 11.5 gigawatts (GW) were signed in Europe in 2024, an increase of six percent over the previous year. With six gigawatts, solar energy accounted for the lion’s share of new PPAs.
Long-term green power supply contracts allow companies to protect themselves from sudden price spikes, so they no longer need to rely on volatile energy markets. At the same time, PPAs can help them meet their decarbonization requirements: As part of the EU Taxonomy Regulation, a growing number of companies are required to file reports and submit proof that their economic activities are sustainable, for example, by using green power.
By establishing a direct relationship between the producer and the buyer, PPAs ensure that power generation and consumption are optimally matched. This helps align the expansion of electricity generation capacity with demand. PPAs also promote the local use of electricity so that it is used as close to the production site as possible, thereby reducing the burden on the grid.
The largest European markets for green PPAs are Spain, Germany, the UK and France. In Spain, the largest PPA market by far, solar energy makes up the vast majority of the contracted generation volume. In Germany, the market is more diverse, with wind energy accounting for a similar share of PPAs as solar (next to a small share of other renewable sources of energy).
According to a study by management consultancy Enervis, the future PPA market will mainly be driven by two economic sectors: the tech industry / data center operators and green hydrogen production.
In 2024, data center operators ranked highest among PPA buyers in Europe with 3.5 GW, followed by the heavy industry with 2.8 GW. Annie Scanlan from RE-Source says it is pleasing to see that the metal industry has signed PPAs with a total capacity of 1.1 GW in 2024, demonstrating that even heavy industry can be decarbonized through renewables. RE-Source also sees a trend towards hybridization in the European PPA market: In 2024, companies signed twice as many PPAs for a combined wind and solar power supply to cover as much of their demand as possible with intermittent energy sources.
