The global corporate power purchase agreement (PPA) market witnessed significant downward pressure in 2022. Cost inflation and supply chain bottlenecks delayed several projects in North America and Western Europe, making corporate off-takers weary of signing long-term PPAs. Further, volatile power prices stemming from a destabilization of Europe’s energy mix due to Russia’s invasion of Ukraine impacted off-taker appetite to lock in supply contracts at prevailing prices.
While the aggregate capacity contracted via corporate PPAs decreased marginally year-on-year (y/y) in North America and Western Europe in 2022, APAC witnessed a 200% y/y surge to 8 GW. With the aim of exploring the key drivers and characteristics of this surge, the Enerdatics research team analyzed corporate PPA activity in the region and summarised its findings on the attached slide, the highlights of which are:
– Large-scale industrial off-takers in India and Australia drove the y/y increase in contracted capacity, primarily due to ambitious decarbonization targets and cost-savings arising from the adoption of clean power sources in high-growth, developing markets
– Companies operating in the cement manufacturing, steel production, and mining segments led the pack of off-takers that announced large-scale PPAs in 2022, with JSW Steel, ArcelorMittal, Vedanta Group, and BHP announcing major PPAs during the year
– Regulated contracts or utility PPAs awareded in several emerging markets proved to be less attractive than corporate PPAs, as seen in Taiwan where Northland Power signed 744 MW of PPAs for its 1 GW Hai Long offshore wind project in spite of securing a 20-year FiT for two phases of the wind farm
– Brookfield signed its second corporate PPA in India in 2022 and stated that it seeks to increase its focus on the Indian market as it forecasts incremental, high-value demand to come from corporates that are increasingly transitioning to bulk customers of clean power
– Capacity off-taken by the technology and telecommunications sector grew by 93% y/y to ~1.5 GW in 2022, primarily due to PPAs by Microsoft and Amazon in India, Australia and Indonesia
The above analysis is proprietary to Enerdatics’ energy analytics team, based on the current understanding of the available data. The information is subject to change and should not be taken to constitute professional advice or a recommendation.
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