New study highlights Power Purchase Agreements as key to renewable energy growth in the Energy Community

A newly published study by the Energy Community Secretariat underscores the key role of Power Purchase Agreements (PPAs) in accelerating the deployment of renewable energy across the Contracting Parties.

The Renewable Power Purchase Agreements in the Energy Community report emphasizes the urgent need to address significant challenges in the region, including insufficient renewable energy supply (excluding hydro), underdeveloped wholesale electricity markets, and regulatory uncertainties that hinder PPA development.

The study highlights that, despite some progress, many Contracting Parties still face key barriers to PPA implementation, such as inconsistent legal frameworks, pricing uncertainty, and a lack of market incentives.

“To address these issues, the study provides actionable recommendations, including the adoption of dynamic pricing mechanisms that reflect the true cost of energy production, strengthening of legal and regulatory frameworks to attract private investments, and the necessity of market coupling with the EU internal market to enhance cross-border energy trade,” says Naida Hausmann, the Lead of the Renewable Energy Task Force, Senior Renewable Energy Expert.

The report also emphasizes the importance of market-based support schemes like Contracts for Difference (CfDs). These mechanisms allow developers to diversify their portfolios by combining state-backed support mechanisms with potential commercial PPAs.

The study also highlights the importance of enhancing capacity building to empower stakeholders in better negotiating and managing PPAs. It also points out the challenges that exporters from Contracting Parties (CPs) will face under the Carbon Border Adjustment Mechanism (CBAM). PPAs can aid CBAM compliance by covering renewable energy sources that could qualify for reduced or exempted carbon charges, provided they meet strict criteria such as grid connectivity and verified emissions. Additionally, cross-border PPAs face obstacles due to inconsistent transmission rights and limited recognition of guarantees of origin.

In conclusion, PPAs are crucial for scaling renewable energy, offering revenue stability for developers and cost predictability for offtakers. Moving forward, efforts should focus on addressing the challenges identified in the study to enhance the framework for effective PPAs.