Author: Nasos Troupakis

Nasos Troupakis is a Director on the Energy & Climate Practice team for Europe, helping organisations reduce their greenhouse gas emissions and meet sustainability targets.

Get together and move forward: our presence and takeaways from E-World

, June 1, 2023

We were happy to join E-World, Europe’s biggest energy trade show, in Essen, Germany on 23-25 May. Since last year’s conference, the landscape of the energy sector has continued to change. The second half of last year was marked by roaring energy prices that started to cool off after some months. In addition, there were regulatory changes with state interventions and pan-European initiatives (i.e., the new market design proposal of the European Commission) that have spurred a lot of discussion. In this ever-evolving landscape, the need to accelerate down the path of decarbonisation and sustainability remains critical. 

3Degrees was well represented with 12 colleagues from various business units, including our consulting and trading teams. We all had the chance to connect with current and prospective clients, enjoy talks with market players, gather market intel, and get intrigued by new ideas. 

3Degrees booth conversations at E-World.

PPA Markets at the Epicenter 

The PPA market was heavily impacted by the recent energy crisis. In most countries, volatility was the main characteristic with developers and buyers being faced with numerous unknowns. From all our discussions we gathered some very interesting observations: 

  • PPA availability has increased, prices have stabilised, and PPA interest remains strong.
  • Permitting and interconnection continue to cause delays and pose risks to new project development.
  • Accounting issues related to International Financial Reporting Standards (IFRS) are leading corporate buyers to consider physical PPAs over virtual ones.
  • Interest is picking up for countries in Southern and Eastern Europe.

While demand and availability are high, closing deals is still not always a smooth process. On one hand, project developers face moving parts in their permitting and financing. On the other hand, corporate buyers need to have a good understanding of the energy and PPA market landscape to ensure fast decision-making. Experienced advisors with technical knowledge and expertise can help both corporate buyers navigate through the challenges and find solutions to close a deal and achieve their climate targets. 

The Landscape for Guarantees of Origin (GOs)

Market participants for the European GO market are quite confident due to a number of factors: 

  • Demand for GOs continues to increase. 
  • Long-term GO offtake from new wind and solar projects is seen as an alternative to PPAs, but lack additionality. 
  • High GO prices do not seem to scare buyers away, but rather underline the need for better market insights and increased transparency. 

New Ideas Gaining Attention

3Degrees teammates who attended the 2023 E-World Conference.

Innovation was also very well represented at E-World:

  • Many companies were showcasing their offerings in hydrogen, a technology that remains in the spotlight with many unknowns to answer for while scaling up. 
  • When it comes to biogas/biomethane, there are a variety of voluntary and compliance standards gaining further attention, which is expected to solidify in the coming years. 
  • Some corporate buyers are moving into biomethane procurement via Gas Purchase Agreements (GPAs) and other structures, as they see limited alternatives to natural gas in order to meet their Net Zero targets.

Looking Toward the Future 

E-World offers a unique opportunity to meet and connect with key market players, catch up on recent developments, listen and understand the challenges everyone is facing in the market, and, most importantly, identify paths to common solutions. 3Degrees remains committed to its mission to help take urgent action on climate change worldwide. 

Look out for upcoming insights on the European energy landscape by signing up for our newsletter. And if you want to work together, let’s not wait for next year’s E-world–get in touch!

Faster Deployment of Renewables in Times of Uncertainty: RE-Source Recap

, October 13, 2022

During the first week of October, some of my European colleagues and I had the pleasure of attending RE-Source in Amsterdam. Over 1,000 key energy players and businesses, including more than 200 buyers, gathered to discuss and enhance their direct renewable energy sourcing and mitigate their risks.

Given the uncertainty of the current energy and political landscape, the event’s timing could not have been more appropriate. How can businesses advance their sustainability efforts amidst the ongoing challenges? What should be changed in our approach to sourcing? Which are the key drivers in moving forward?

AN EVOLVING LANDSCAPE

Senior Director, Energy & Climate Practice, Tyler Espinoza, speaking at RE-Source 2022 session “Going further: Using procurement to maximise system sustainability.” Image courtesy by RE-Source.

 

During the multiple sessions, panels and roundtables, different market experts shared their views and highlighted the challenges that need to be addressed. 

The first challenge is the market dynamics. We live in unprecedented times with the energy crisis and extremely high prices that increase uncertainty in almost all aspects of the market. These extraordinary times call for a commitment to energy transition goals, an acceleration of actions taken, and innovative solutions.

The regulatory changes are a cause of hesitancy for developers and buyers. This was addressed in the opening session of RE-Source where several market players stressed the need to be more practical about timing new regulatory changes and keep simplicity in the implementation procedures.

Just last month, the European Commission proposed a price cap of 180€/MWh for non-gas fuelled generators, and the implementation would be left to the individual Member States. 

The second challenge is the slow permitting procedures. The need to speed up the deployment of renewable energy is key to tackling the energy crisis, and faster permitting for wind and solar projects is a crucial facilitator. 

The third piece was both a highlight and a challenge, with increased innovation and enhanced technology. New technologies and commodities are expected to enter the market, e.g., hydrogen, prosumers, and flexible assets. Existing mechanisms will be further enhanced, e.g., 24/7 CFE matching. The need for a sound and functioning market design and a reliable interconnected grid on transmission and distribution levels were highlighted in the discussions, particularly in the session on “Grid development to foster RES and PPAs.”

CHANGING APPROACH TO PPAs

Considering the above-mentioned challenges, changes to the PPA market are inevitable. A common remark from attendees was that the dynamics have shifted towards a seller’s market over the past years. However, both sides of the transaction are affected by uncertainty in price forecasts, permitting, supply chain risks, and more. Ultimately, pricing is important, but the focus on the Commercial Operation Date (COD) and its flexibility is continuously increasing.

Therefore, when seeking internal permission for a power purchase agreement, early engagement of all stakeholders is essential to establish a good understanding of what it means to enter into long-term agreements. Moreover, it’s crucial to keep a spirit of partnership in the negotiations between sellers and buyers and start considering creative solutions and products. 

ROLE OF CORPORATE SOURCING WITHIN THE ESG FRAMEWORK 

In the session: “Going further: Using procurement to maximise system sustainability,” our Senior Director, Energy & Climate Practice, Tyler Espinoza, made a critical remark: “PPAs just aren’t good enough anymore. Corporate sourcing represents a significant opportunity to decarbonise, but it’s just one aspect of ESG.” 

Corporate buyers can leverage their PPA procurements to advance other ESG initiatives in a meaningful way. He explained more ways to help clients advance their initiative:

From the environmental side, Choose PPA markets that have comparatively high carbon intensity (e.g., Poland) to maximise carbon benefit. Ensure projects are sited in a way that minimises negative impacts on land, habitats, and wildlife. Confirm that developers’ end-of-life plans involve clear internal protocols in terms of recycling. From the societal perspective, Inquire about material sourcing practices in order to avoid equipment manufactured using forced labour, which may violate laws and company policies. Engage communities in a meaningful way beyond just confirming no local opposition. Funding local organisations or community needs can go a long way. Choose developer partners that have proactively implemented diversity, equity and inclusion, and other sustainability initiatives.From the environmental side, Choose PPA markets that have comparatively high carbon intensity (e.g., Poland) to maximise carbon benefit. Ensure projects are sited in a way that minimises negative impacts on land, habitats, and wildlife. Confirm that developers’ end-of-life plans involve clear internal protocols in terms of recycling. From the societal perspective, Inquire about material sourcing practices in order to avoid equipment manufactured using forced labour, which may violate laws and company policies. Engage communities in a meaningful way beyond just confirming no local opposition. Funding local organisations or community needs can go a long way. Choose developer partners that have proactively implemented diversity, equity and inclusion, and other sustainability initiatives.

All in all, standards play a pivotal role in advancing the net zero journey.

HEADING INTO THE FUTURE AT FULL SPEED

One of the main takeaways of RE-Source was that the current uncertainty should not act as a “pause” button, but rather as motivation for the future. Most attendees agreed that the faster deployment of renewables plays a pivotal role in reducing Europe’s dependency on fossil fuels and in meeting the climate goals. That’s why a “wait-and-see” attitude should be replaced by a “decide-and-do” one.

3Degrees supports clients worldwide in their sustainability and decarbonisation journey, so if you’re interested, don’t hesitate to get in touch.