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Key MEP proposes standardised PPAs in market reforms


25 May 2023 09:20




25 May 2023 09:07

(Montel) The European Commission would have to develop standardised power purchase agreements (PPAs) for shorter durations, including up to five years, under proposals from the European Parliament’s lead negotiator on electricity market reforms.

The aim of this and other proposed changes was to make it easier for smaller companies to sign PPAs and so protect themselves from power price volatility, centre-left Spanish MEP Nicolas Casares told a Florence School of Regulation webinar late on Wednesday. 

PPAs are currently mostly only available to large energy consumers in a few EU countries as they are usually complex and tailor-made, with the risk of credit default during the typical contract run of 10-15 years proving to be a major barrier to take up.

The proposed standardised PPAs for voluntary use would have to offer power in different timeframes, with various price formulas and adapted to different sized end-users, according to Casares’ proposed amendments to the EC’s reform proposals.

He has also proposed a European PPA trading platform to be set up by 31 December 2024 and information databases managed by regulators to be in place within a year of the reforms being applied. 

He wants the EC to set up the European platform enabling all market participants to access PPAs, including the new standardised PPAs, with options to allow smaller customers to take part by aggregating their demand. 

Enhance transparency
The aim is to make PPA transactions more transparent and lower the costs, particularly for smaller companies, with EU energy regulatory agency Acer setting up and maintaining a database to store data on all PPAs signed in the bloc.

Parties signing PPAs would report details to their national regulator for storage on a national database, as well as transfer to Acer.

These details would include the names of the parties, whether it was a physical or financial PPA, the duration, volume and type of power and the bidding zone for delivery. They would also include the price structure and any public support and guarantees.

National regulators would use this data to produce annual reports on how the PPA market was developing, while Acer would produce an annual EU-wide report.

Next steps

The parliament’s energy committee is scheduled to vote on 19 July on its recommended negotiating position for talks with the EU Council of ministers, representing national governments, on the electricity market reforms.

The parliament, council and commission must agree on a common text before the draft proposals can become binding. EU leaders want this agreement by the end of this year.

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