Storage and hybrid deals gain traction; 2025 outlook shows opportunities for competitive pricing
The European renewable energy Power Purchase Agreement (PPA) market demonstrated strong recovery in 2024, with nearly 19 gigawatts (GW) of new capacity contracted, according to the latest Europe Renewables PPA Tracker report released by Wood Mackenzie.
The report highlights a surge in PPA activity, with Spain and Germany leading the market, accounting for 30% of total capacity. Solar PV and wind projects represented approximately 80% of contracted capacity, with each technology contributing similar volumes. Poland, the UK and Greece entered the top five across all deal types (corporate, route-to-market and utility).
Emerging Trends in Contract Structures
As the PPA market matures, innovative contractual arrangements are becoming more prevalent. Notably, there's an increase in deals involving renewables co-located with battery storage, addressing the challenge of negative pricing periods.
'We're seeing a shift towards more sophisticated PPA structures,' said Dan Eager, Research Director, European Power & Renewables at Wood Mackenzie. 'While still a small part of the overall market, hybrid storage arrangements that combine renewables and batteries in a single contract are gaining traction, particularly among energy-intensive industries and data centers seeking 24/7 energy matching.'
Corporate PPAs Lead the Way
Corporate PPAs continued to dominate the market, representing over 70% of the regional market, with route-to-market deals the next most common. 'The technology and data sectors were the primary drivers of offtake activity in 2024,' noted Eager. 'These power-intensive businesses are increasingly relying on PPAs to sustain their future operations and meet sustainability goals.'
PPA Pricing Dynamics
The report indicates a complex pricing environment at the start of 2025, influenced by factors such as curtailment risk, negative pricing, and retail price evolution. While PPA prices declined in 2024 alongside wholesale power prices, the outlook varies by region and technology.
'Our analysis shows that Iberian markets offer particularly appealing conditions for both solar PV and onshore wind PPAs,' Eager explained.
2026 Forecast Shows Continued Opportunity
Wood Mackenzie's fair value outlook for 2026 suggests continued opportunities for competitive PPA arrangements, especially in solar PV and select onshore wind markets. The report also anticipates the emergence of hydrogen PPAs in Europe, contingent on regulatory clarity.
Eager concludes, 'The growing influence of low-cost renewables on wholesale price formation, particularly in spring and summer, is leading to increased volatility and uncertainty. Our wholesale market modelling indicates that capture rates are set to decrease over the next five-to-seven years as demand growth lags renewable supply additions and the flexible capabilities of markets are stretched. Over this period average market prices will also be falling as European gas prices decline. In turn, the capture price and risk components in PPA pay-as-nominated prices will evolve.
'While market conditions vary, our fundamentals-based forecasting indicates that there are still opportunities for mutually beneficial PPA deals. The key will be navigating the complexities of each market and technology to find the right fit for both developers and offtakers.'
Source: Wood Mackenzie
