Our solar PPA market may not perform as well as it has done in the past says a new report.
LCP Delta’s conducted analysis for EDF – which warns solar power buyers not to rely on recent Power Purchase Agreement (PPA) profits continuing.
Over the past three years, an unusual alignment between seasonal conditions and market prices allowed solar offtakers to profit but this was largely chance-driven.
The energy crisis, not solar generation, shaped these trends.
With negotiations set for spring 2025, strike prices must be realistic, starting within the £80-100/MWh range, to maintain long-term growth and meet the UK’s Clean Power 2030 targets.
Overestimating could stall the solar PPA market.
Bertalan Gyenes, Consultant at LCP Delta commented: “Over the past six years, PPA profitability has been much higher than expected due to fortunate circumstances, so the true offtaker risk has not materialised. However, future PPA negotiations must consider the potential downsides… and not set strike prices too high.
“Our modelling indicates that there are already clouds on the horizon so far this winter. If prices start to creep, offtakers are likely to lose money, potentially decimating the solar PPA market at a crucial moment.”
David Edmonds, Head of Pricing & Valuations at EDF added: “It’s really interesting to see this analysis presented from an offtaker’s perspective, something which we haven’t seen a lot of in the industry media.
“The call to action for sustainable solar PPA pricing is a welcome one. It demonstrates the importance to solar generators of working with an experienced offtaker with a deep understanding of the market dynamics.”
