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Investors in SEE region face lower-than-expected PPA offers

Investors in SEE region face lower-than-expected PPA offers

Date: June 7th 2024

Author: Dalibor Dobrić

Category: En.vision

Topic: Electricity , Renewables , Energy policy

The lure of soaring energy prices in 2022 attracted many new investors to the Southeast European (SEE) market, whose financial expectations regarding power purchase agreements (PPAs) are now colliding with reality, a trader told Montel.

Although they do lack the knowledge and infrastructure required to manage their assets, these new investors are presenting a good business opportunity for traders, even though it will require investing a lot of time and effort, said Simon Sfiligoj, head of power and global commodity trading at Gen-I, after the ETCSEE conference in Budapest.
 
“The problem is that there are already now too many solar power plants in the system, and… [prices] plunged incredibly. This difference between baseload and solar in the [coming] years will be even bigger,” he said.

Battery storage systems and the software for optimising their use present a hedge investment opportunity, and the financial return they can offer would compensate in periods when solar production is low, he added.

However, market illiquidity for five or seven-year PPA tenures is hindering the bankability and feasibility of these new renewables projects.
 
Investors need to find bigger companies that are willing to take on the risk and want to fix their power prices for the longer term. Trading companies are not usually keen to take on such risk, Sfiligoj said.

Croatian projects on hold

Not many PPAs have been publicly announced in Croatia, but Sfiligoj believes that quite a few more have been signed.

According to the Gen-I trader, some renewables projects in the country are currently on hold, partly because of permitting and administrative bottlenecks, but also because investors are waiting for “better times” to conclude their PPAs.

“What they should do, and some are trying to do, is to have in place the contractual basis and wait for the right time to conclude it. Because the negotiations of the terms and requirements can take… between six and eight months for larger projects,” Sfiligoj said.



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