How flexibility and hybrid projects can drive European renewable energy dealmaking

“We see the CfD scheme as very attractive, from the generator’ perspective, for different reasons,” said Francisco del Rio, head of power sales Europe at NTR, who spoke to PV Tech Premium during the summit.  “One of them is [that the contracts are] long-term, up to 20 years, which provides stable cash inflows and predictability and stability in terms of price.

“That opens the door for financing and raising debt, as well.”

NTR is very active in the UK solar sector, with an operational portfolio of nine projects with a combined capacity of close to 100MW; the company is also developing its first solar-plus-storage project in the country, a 123.5MW project in Fair Oaks that will be the largest in its portfolio upon completion. However, with each round of the UK auction scheme seeing considerable interest, and the CfDs themselves not protecting developers from negative prices, del Rio says there is an “opportunity” to look for corporate offtake agreements even in countries with robust government auctions.

More flexible trading strategies

While the long-term tenors and minimal counterparty risk of government auctions make CfDs attractive for developers, this is not to say that corporate offtake agreements are wholly without merit. Earlier this year, SolarPower Europe published a report showing increased appetite for CfDs in Europe, and less demand for corporate offtake agreements, but told PV Tech Premium that a “complimentary” relationship between the financing mechanisms would be for the benefit of Europe’s dealmaking space in general.

Indeed, del Rio noted that even a CfD brings an element of risk, and that for developers, keeping options open, and being flexible with regard to different financing structures, could be essential.

“There are factors that can influence the appetite from generator and investor perspectives, such as regulatory and political uncertainty, for instance, the uncertainty around the grid connection charges or the ROC (Renewable Obligations) indexation change or wholesale CfDs,” he said. “The REMA (Review of Electricity Market Arrangements) and the discussions over the last few years around market reform, that, together with the high interest rates when compared to other regions in Europe, can influence the overall picture.”

Anastasios Christakis, COO at developer Queequeg Renewables, went a step further, saying there are considerable similarities between government auctions and corporate offtake agreements, and that developers should be looking for both as they look to secure finance.

“It’s not free money for these projects!” he said of CfD schemes. “It stimulates competition, and the way that they’re structured, the government tells the market what they want, putting even more pressure on market participants. From our perspective, as market participants, we don’t see it as free money, because we need to be very competitive.”

Another area of flexibility that was referenced throughout the event was that of shorter-term PPAs; in a presentation at the start of the summit, Martin Gaffney, SVP of sales at On Site Energy, said that his company has sought to sign deals “as low as four years”, and Christakis said that there is certainly potential for these kinds of shorter-term deals in the current uncertain macroeconomic environment.

“I have seen [short-term PPAs], but the banks don’t like it because the project has to be bankable, especially now in the UK, where we have bigger and bigger projects,” he said. “In order to realise these projects, you need debt and equity, so that’s the only point of contention here, that you need to allow for the flexibility of shorter PPAs—of six to ten years—but you need to have a long-term route to market in order to satisfy the banks and finance your projects.”

“I have seen hybrid models, where you guarantee some of the supply for a fixed price—you create a floor—to satisfy the banks and the rest is merchant, to have an upside,” he continued, suggesting that more sophisticated offtake design could be necessary if these kinds of PPAs are likely to be adopted by the market.

Hybrid projects emerge as ‘there’s no magic bullet’

Another area of complexity for renewable energy developers is the technology being deployed. When asked about the role of technology-neutral auctions, Christakis said that it is “quite difficult” to set prices for different technologies due to the different economics of solar PV, onshore wind and offshore wind.

“It’s quite difficult to have different technologies with different development and construction [costs] compete, so you have to be fair to them,” he said. “You don’t do it because you have a vested interest—you’re a solar developer or a wind developer—it’s more about how you recognise the risks in the different technologies that’s why you need to separate it and have the prices reflect the risk that [developers] are taking, and the same for wind.”

This is perhaps best demonstrated by the results of many of Europe’s leading renewable energy auctions; Germany’s first technology-neutral auction, for instance, held in 2018, saw the entirety of the offered capacity go to solar PV projects, in no small part because of the low levelised cost of electricity (LCOE) for solar projects, both compared to fossil fuels and other renewable energy technologies.

Gaffney, meanwhile, said during his presentation that the need for greater flexibility in offtake agreements means that an increasing number of developers are looking to co-locate solar and wind technologies, despite the complexities and costs associated with such a move.

“You’re seeing more and more impact of large-scale solar projects and wind installers combining technologies, and you’re’ seeing renewables start to make a real show in the PPA scheme,” he explained. “This is important because there’s no magic bullet, and no singular instance, that you can put into your business that gives you that one hit that you all want.”

Battery energy storage systems (BESS), meanwhile, pose a more pressing question for auction design; they are becoming increasingly popular, particularly when co-located with renewable electricity generation, and these projects have become cost-competitive with fossil fuels.

“Somehow batteries will become an integral part of what we do—because of curtailment, because of the duck curve—so the auction system has to accommodate for that as well,” said Christakis. “In the UK, for instance, we’d like to have a pot—and we may have to create a separate pot—for hybrid projects because it’s a unique risk; you have two assets, one is a generating asset—solar or wind—and one is a battery.”

His comments follow hours of discussion of the merits and complexities of integrating batteries into renewable generation projects at last week’s summit. Sonia Grunenwald, a researcher at BloombergNEF, gave a presentation about the financial benefits of co-location, and described how “flexibility purchase agreements” have become an essential part of the battery revenue stack.

“We’ve seen flexibility purchase agreements really increase within the revenue stack,” she said. “In 2024 they suddenly appeared and were about 8% of the total revenue and in 2025 that jumped to 24%;that’s quite a big increase.”

With batteries, and co-located batteries in particular, an increasingly important part of financing assessments in the European renewables space, there is a risk that projects become yet more complicated than ever before, as developers look to co-locate assets that are, ultimately, delivering different services.

“It is [more complicated] when compared to standalone renewable assets,” del Rio told PV Tech Premium. “Typically, the assets are operated a little bit isolated, so with a CfD or PPA in place then [developers] optimise the battery around the existing revenue structure, from the solar asset.”

However, he noted that as the market matures, revenue structures will emerge to make the best use of these co-located projects: “There are new structures that, for sure, will be evolving in the future so there’s a lot of opportunities in the future to maximise revenues with these kinds of structures, and to maximise the value of the grid connections.”

Improving internal and external expertise

This complexity comes from the challenges associated with finding the most optimal ways to generate revenue from a co-located asset, rather than the technical challenges of installing and operating the assets themselves. Christakis says that the speed at which the European renewables industry is having to move means the sector, as a whole, is on something of a “learning curve”.

“This is part of the learning curve for the whole industry,” he told PV Tech Premium. “Britain has been very good at building out this skill set and having expertise to be at the forefront of any technological advancement. The way you navigate it, given the current political environment, means that you build out the skill set in order to accommodate this type of technology.

“There is a bit of dissipation between countries, where people move from country to country to bring this expertise, so it’s a matter of how you create a community in the industry, where they have the expertise and [can] try to transfer it to the rest of the industry.”

This sentiment was echoed by del Rio, who said that those involved in the market—from investors to developers to offtakers—would learn from their time in the industry to build up this kind of depth of experience.

“Everyone is learning from their market involvements, and I think the most sophisticated corporates will be the front-runners here,” he said. “But with time, all the market participants will be on board and will be participating actively in structures.”

Indeed, del Rio said that external advisors can be a “key” tool to build up this kind of expertise, while Yassine Bounajma, category sourcing manager for global industrial vendors at Philips, said that his company had sought to “build a global energy committee” that could help bring some of this industry expertise in-house. Both approaches have merits, and improving the understanding of every player in the industry, according to Christakis, will only be to the long-term benefit of the European renewables sector.

“My philosophy is to create a win-win-win-win situation,” he said. “Nobody is going to lose in the long-term because we need a market that’s profitable, from the manufacturer to the investor, otherwise it’s not sustainable. Apart from the transition, we need to look at the sustainability of the industry, to make sure that not one party wins at the cost of someone else.”