European solar developers ditching auction tariffs for PPAs due to higher costs

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Panellists discussed the challenges European solar developers are currently facing. Image: Solar Media.

European solar developers hit by rising module costs are scrapping tariffs secured in auctions and are instead looking to sign power purchase agreements (PPA), according to a speaker at today’s Large Scale Solar event.

Christopher Renna, commercial director at consultancy Natural Power, said that with developers affected by rising capex for projects under development, they are sometimes “able to find ways to walk away from their tariff, sign a PPA – we have seen people exploring this option and some actually looking very closely at taking it”.

Other developers are taking a “very risky proposition” of delaying module purchases to see if prices will go down in the coming months, Renna said at the event, hosted by PV Tech publisher Solar Media in Lisbon. He added: “So there are people who have some projects that have very tight margins. We see this across the industry, across markets in Europe. So people have to get creative to fit within those constraints.”

One company impacted by such cost increases is Akuo Energy, a developer and independent power producer that was awarded 370MW of capacity in Portugal’s solar auction in 2019, which featured record-low bids.

“We are suffering,” said João Maria de Macedo Santos, head of region, Portugal, at Akuo Energy. Nonetheless, the company is progressing with projects it secured in the auction, with one expected to break ground shortly.

To cope with the short-term volatility, “it’s key to have very long-term financing partners”, with Akuo having collaborated with insurance companies and pension funds, João Maria de Macedo Santos said.

Echoing comments made during the event yesterday, he said developers need to work on highlighting the benefits of solar to the public. “We see in Portugal, public opinion needs to be changed from a threat to an opportunity. It’s a lot of work for promoters, also the public sector to explain, educate people, share the value of these projects locally.”

The panel discussion turned to supply chain issues, with Mark Augustenborg Ødum, co-founder and chief investment officer of Better Energy, revealing that the Danish independent power producer has long-term plans in place with its suppliers, including container traffic from China, to mitigate such challenges.

However, with parts of China entering new COVID-related lockdowns and European solar players having significant external dependency for products, Augustenborg Ødum called for a ramp-up of polysilicon production in Europe.

“The elephant in the room is polysilicon production. We need a huge polysilicon production facility in Europe,” he said, adding subsidies should be provided in the European Union.  

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