Our New Energy (ONE), a young Spanish company, has advised the English investment fund Foresight Group in the structuring and closing of the first PPA in Europe that will allow the construction of the first renewable plant that will not perceive any subsidy. The renewable facility will be located in Murcia, Spain, and will produce 7,000 megawatt–hours (MWh) of electricity annually.
Our New Energy (ONE), a young Spanish company, has advised the English investment fund Foresight Group in the structuring and closing of the first of a series of PPAs that will allow the construction of the first renewable plant in Europe perceiving no subsidies at all. This unprecedented agreement on the continent has been closed between the English investment fund Foresight Group and the trading company Enérgya-VM, belonging to the Villar Mir real estate and industrial group.
This agreement will cover the construction of the Torre de Cotillas I (Murcia) project with a power of 3,952 kilowatts peak (kWp), and an estimated annual production of 7,000 megawatts-hours (MWh), equivalent to the electricity supply of 3,000 homes, and will prevent the emission of 3.6 tons per year of CO2 into the atmosphere. It will be built and operated by the construction company Solarig Global Services, according to Enérgya-VM.
The Torre de Cotillas I plant will be a milestone in the history of renewable energies in Europe as it will be the first to rely exclusively on a private PPA to ensure its viability. The Power Purchase Agreement (PPA) is a private agreement between two parties that agree on the conditions of purchase and sale of energy for a period of time. This in particular guarantees a closed sale price for the photovoltaic energy generated during the next 10 years in the Murcia park.
First PPA in Europe
The long-term PPA as an investment tool in renewable energies with no state subsidies is an unprecedented formula in Europe, but relatively common in the United States, where it has been a cornerstone for the promotion of renewable energies. For the seller, this agreement represents the income guarantee. For the buyer, a stable price in addition to a tangible commitment to the renewable industry of the future, Our New Energy explains in a press release.
ONE anticipates that the PPAs will have a great development in the coming years due to their economic and environmental benefits: “After the premiums for the production of renewables were ruled out in 2014, investment in new plants has been virtually paralyzed in Spain. The PPAs represent a pragmatic and holistic solution to the future of the energy model in Europe; As such, the PPAs are the key to recovering the investments in the renewable sector in Spain “, said Miguel Marroquin, CEO of ONE, who is convinced that this agreement will be followed by others soon, as ONE is advising the negotiations of similar agreements.
“The PPAs will be a seal of sustainability and corporate social responsibility that no industry will want to renounce,” says Manuel Raigada, director of Business Development at ONE, who insists on the possibilities of this formula for the Iberian market: “Spain, with excellent renewable resources, one of Europe´s highest electricity prices and a highly experienced and knowledgeable renewables sector has the ideal conditions for the expansion of this contracting formula “.
In the words of María Luisa Huidobro, CEO of Villar Mir Energía, “it is a historic milestone, because it is the first PPA made in Spain, and it paves the way for this type of agreement between producers and long-term energy buyers. We are very pleased with this contribution to the market and we hope that this new instrument will favor future contracts that make the development of new renewable generation facilities possible in our country. “
“Although we cannot forget that price is the key variable that ensures the profitability necessary for the execution of the project, we have managed to incorporate management tools that increase the value of the transaction beyond the standard thresholds in this type of contract, as are the guarantees, payment terms or energy delivery commitments, ” she concludes.