In 2024, the European market for renewable power purchase agreements (PPAs) is on the brink of significant growth. Notably, major mergers and acquisitions (M&A) have taken place in the region, focusing on energy companies. These developments signal a renewed investor interest in renewable energy following a sluggish start to the year.
The surge of high-value European green energy deals in 2023 marked the busiest and most dynamic period in Europe’s history of renewable energy power purchase agreements. The market is now entering what experts are calling its ‘Golden Era’. Corporate buyers have secured 21 TWh/year of green electricity from 10 GW of new projects in the first five months of 2024, maintaining a pace similar to that of 2023, as reported by S&P Global Commodity Insights.
The number of deals has increased to 145, compared to 94 in the same period in 2023, indicating a growing number of players entering the market. The growth has been primarily driven by 10.2 TWh/year of wind PPAs in northern Europe and 7.5 TWh/year of solar PPAs, predominantly in Spain. Additionally, three major European M&A deals targeted energy companies during this period. The largest deal involved US-based Energy Capital Partners acquiring British renewable energy firm Atlantica Sustainable Infrastructure for a transaction value of €7.25 billion. Energy Capital will acquire all Atlantica shares, with Atlantica’s largest shareholder, Algonquin Power & Utilities, supporting the deal.
This transaction is expected to be finalized by early 2025, at which point Atlantica will become privately held, delisting from public markets. The second-largest deal saw Canadian investor Brookfield Asset Management and co-investor Temasek proposing to acquire a majority stake in Neoen SA, an independent renewable energy producer with approximately 8 GW in operation and under construction, along with 20 GW in development. After Brookfield’s bid for Neoen, JP Morgan analysts noted a renewed willingness among investors to invest in green energy development pipelines.
These high-value deals underscore a robust interest in renewable energy, highlighting the sector’s significance not only in Europe but also in global energy strategies and investor portfolios.
Market Dynamics, Price Trends, and Regional Challenges
However, deal prices have seen a decline due to lower electricity spot and forward prices, as reported by S&P Global. Iberian capture prices hit record lows this spring, influenced by bearish fundamentals and the increasing solar capacity. In Germany, May’s solar capture price dropped to its lowest level since summer 2020, although forward contracts have shown recovery, with the benchmark German year-ahead power contract rising by almost 50% from its February lows.
Spain and Italy are facing unique challenges. In Spain, despite strong corporate interest, volatile market conditions and high interest rates have hindered PPA contracting. Insufficient grid capacity has also posed challenges, a problem shared with Italy and Germany. In Italy, central permitting delays have slowed down project authorization, and restrictive auction systems further complicate the market. Germany is expected to closely compete with Spain for PPA leadership in Europe. In the first five months of 2024, Germany signed 21 deals for 2 GW of capacity, focusing on utility-scale solar and offshore wind projects.
Despite regulatory uncertainties, Germany’s large industrial base and tech sector are driving PPA demand. New corporate sustainable reporting rules and mandatory data center requirements serve as additional demand drivers. In the UK, government-run contract for difference (CFD) auctions are highly attractive, potentially crowding out private sector deals. However, the ongoing Review of Electricity Market Arrangements (REMA) adds uncertainty, causing some market participants to pause their activities.
Sectoral Shifts and New Opportunities
While Brookfield has the financial capacity for large-scale deals, few investors can match such substantial investments. Initially, oil majors were expected to be significant players in the renewable energy sector. However, the focus on energy security following Russia’s invasion of Ukraine has shifted their priorities. Recently, Norwegian state-owned power producer Statkraft AS completed a €1.8 billion acquisition of Spanish group Enerfín SA. Additionally, several privately-owned developers are anticipated to enter the market this year.
Market analysts project that this trend will continue as the cost of deploying renewables continues to fall significantly. RMI data shows that costs drop by around 20% for every doubling of deployment. While tech companies remain the leading buyers of PPAs, consumer goods, industrial, chemicals, and utility sectors are also emerging as significant offtakers. The rise of artificial intelligence computing power is creating new opportunities, with increased activity seen in countries like the Nordics and Iberia.
Spain, in particular, is becoming a key hub for data centers due to favorable conditions such as low prices, low taxes, and access to renewables. The reform of the EU’s electricity market aims to broaden access to PPAs, with government support being crucial to make these PPAs financeable. Overall, 2024 is shaping up to be a pivotal year for Europe’s green power deals, driven by increased corporate commitment to renewable energy, mirroring a similar trend in the U.S., despite facing significant regional and market-specific challenges.
