The scale of what is coming

In 2024, European data centre demand stood at just under 100 TWh from around 19 GW of grid-connected capacity. According to Pexapark’s PPA Tracker database, 13.6 GW, or 72%, was contracted through PPAs, one of the highest clean-power procurement ratios of any industrial segment. This is a market that has embraced long-term renewable contracting as a structural feature, not an optional sustainability add-on.

Looking ahead, the numbers continue to remain striking. Projections show a potential additional demand pool of another 15.8 GW until 2030. Assuming similar contracting ratios will prevail, additional 11.7 GW of long-term PPA capacity could be expected within five years or the equivalent to adding the size of the entire 2025 German PPA market every single year according to Pexapark data. While the PPA demand outlook from the mid-market segment is bearish, data centre demand looks solid and realistic. EUDAC’s data implied an annualized CGAR of 17%, against realized historic annual growth of 20%.

Data centres already account for a third of the European PPA market. Since 2018, 142 deals were signed by tech companies to decarbonise their operations. And this sector will remain the most dominant and upbeat force in corporate long-term PPA demand just not in the same geopgrahical areas as before.

Where the PPA demand will materialise

The geography of data centre growth is shifting decisively. Historically, the vast majority of data centres were built in the so-called FLAP-D metropolitan areas (Frankfurt-London-Amsterdam-Paris plus Dublin).

Growth 2025 to 2030 is changing in two ways. First, hyperscalers will be building their sites increasingly in Southern Europe (+4.8 GW) and Nordic (+3.2 GW). While FLAP growth is constraint, the data centre industry as surveyed by EUDAC still expects to add 6.4 GW in this period in the original European data center hotspots. The move to new geographies is driven above all by the availability of energy contracting opportunities, which are plenty in both areas and great news for large scale renewable investment. These data centres are of hyperscale nature (+100 MW) and used for AI training. The second growth area is in new metropolitan areas such as Madrid, Milan, Warsaw and Zurich. Those data centres are built for AI use where latency and hence proximity to clients is important.

Most recent deal data confirms this trend with most data centre PPAs being signed in Italy (568 MW), Finland (472 MW), and Spain (314 MW).

The broader long-term PPA market context

Traditional European momentum for long-term PPA cooled in 2025 as the market adjusted to lower capture expectations and demand saturation by corporates for stand-alone solar profiles. Total disclosed contracted PPA capacity fell to 13.1 GW across 247 deals, down from 15.3 GW in 2024. Within this cooler environment, data centre demand stands out as one of the few categories of buyers maintaining structural demand growth. EUDAC’s data centre survey would indicate an average annual contracting need of 2.6 GW representing likely a solid floor to long-term corporate PPA demand until 2030, a total of 15.6 GW. This is based on the assumption that long-term PPA remains the principal contracting tool as in the past, an assumption which is underpinned by the European Energy Directive (EED) mandating transparency and a sector-wide commitment to 100% PPA sourcing. Finally, this is demand that not only pays money for speed with high credit quality but also is most advanced in terms of hourly matching through the sourcing from multi-tech sources or through large utility arrangements.

Further reading:

A Data Center Tale: The Hunger for PPAs

EUDCA Market Report 2026

Pexapark Outlook 2026

A few things that personally caught my attention:

• BESS & solar surge despite every headwind. Federal policy uncertainty, tariffs, the works. ERCOT doesn't care. March 2026: wind at 28 GW+, solar at 32 GW+ Records, records, records.

• An interesting ERCOT proposal: a one-time $1,500/MW incentive for older BESS assets to retrofit and provide advanced grid support. Small detail, big signal about where grid services are heading.

• The January arbitrage spike. A single cold snap drove a 27-28% YoY jump in TB2 revenues in Q1. Strip that out, and Feb-March were below prior-year levels. BESS upside is increasingly reliant on weather-driven volatility events. That's a different risk profile than most underwriting assumptions imply.

• Volatility lifts TB spreads but toll prices don't follow. The forward revenue stack tells a more nuanced story than spot performance suggests.

• Longer duration = more revenue potential, less predictability. At the Houston Hub: a 2h battery sits in a valuation range of $5.44–$7.75/kW-month. A 6h battery: $5.96–$12.33/kW-month. The ceiling rises but so does the spread between perfect and persistent capture. Duration is not a free lunch.

• Big Tech just powers on. 13 PPAs, over 3 GW signed in Q1 alone, nearly double Q4. Google and Meta Facebook accounted for ~80% (!) of publicly announced volumes. This is not ESG-driven procurement. It is "contract what you can".

• And then solar capture rates. This is the chart I keep coming back to. From close to 100% in early 2024 to ~0.71 rolling average by end of Q1 2026. February hit a record low of 0.53. Negative price hours up 286% YoY. Solar is cannibalizing itself and the market is repricing it, with solar PPA fair values softening for the first time since Q2 2025. Wind, meanwhile: still holding at ~0.92 capture. Despite GWs and GWs of installed capacity & growth. What a resource. Underappreciated as in so many markets!

ERCOT. Always delivering. Never boring. What a market.

The competitive race for AI leadership has transformed the narrative of “AI-driven load growth” from a forecast into an actual physical constraint. We are now discussing an AI bubble but the investments and the load growth is real! While the public eye often tracks the energy moves of Amazon or Google, Meta Platforms, Inc. is much less covered even though it is a central protagonist in this industrial drama.

My interest in Meta’s dealing in the energy space was sparked this Sunday on a run in the park while listening to the most recent Open Circuit podcast which dissected at length the recent nuclear arrangements by the company. And I have stumbled recently on articles and discussions somehow related to their procurement and investments which triggered me to dive a bit deeper.

Historically, Meta’s approach was rather passive with its focus on (unbundled) REC procurement. I might be over simplifying this a bit but I would be happy to be challenged on this! This stance likely left Meta with fewer market insights, thinner developer relationships, and less sophisticated approach to energy risk compared to its tech peers

So they pivoted hard.

And much like their historical shift in moderation policy, their energy strategy evolution was executed with similar intensity and in full alignment with the strategic priorities of the new US government.

I wanted to cover their overall approach by looking at three distinct areas:

1. Market Integration: The launch of Atem Energy, a subsidiary designed to trade wholesale electricity and manage risk directly.

2. Financial Engineering: The use of sophisticated off-balance-sheet structures (such as the $26B Hyperion JV) to fund massive CapEx without diluting their equity too much.

3. Thermal & Nuclear Focus: An embrace foremost of natural gas and nuclear (over 6GW in recent deals) to secure large quantities of electricity.

Atem Energy or catching up with the market

When Meta finally internalizes functions of an energy traders it is for sure a signal that electricity has evolved internally from one of many items in our long list of things we spent money on to a strategic company activity. This strategic shift was embodied by the creation of Atem Energy LLC, a wholly-owned subsidiary designed to interface directly with wholesale power markets.

In late 2025, Meta filed an application with the Federal Energy Regulatory Commission (FERC) under Docket ER25-3440, requesting “Market-Based Rate” (MBR) authority for Atem Energy. Without MBR authority, an entity is restricted to selling power at cost-based rates, which limits commercial flexibility. With MBR authority, Atem Energy can act as a power marketer, legally empowered to buy and sell electricity, capacity, and ancillary services at market-determined prices across the United States.

The establishment of Atem Energy is not just an administrative maneuver. In my view it embodies well the evolution of Meta’s pivot in energy matters. The volatility of wholesale electricity markets, exacerbated by extreme weather events and the intermittent nature of renewable generation, presents a significant financial risk to any company with multi-gigawatt loads. By establishing a trading desk, Meta gains the ability to:

1. Hedging and Arbitrage: Likely, the primary function of the desk is to hedge against price spikes. However, a more sophisticated play may involve arbitrage. Data center often have backup generation capabilities and battery storage. In moments of extreme grid stress, e.g. when wholesale prices can jump from $30/MWh to a multiple thereof, Atem Energy should allow Meta to flip its position, selling excess power or ancillary services back to the grid.

2. Inventory Management: Hyperscalers must procure power well in advance of actual consumption to ensure capacity availability. This can lead to a “long” position where the company has contracted for more power than it currently consumes. Atem Energy would then provide the mechanism to liquidate this excess inventory efficiently in the day-ahead or real-time markets.

3. Market Intelligence: And finally, and not to be underestimated, operating a trading desk provides granular, real-time visibility into grid congestion and nodal pricing. This data is invaluable as well for siting future data centers, as it reveals the true stress points of the grid.

Compared to their colleagues at other tech behemoths, Meta was late to this. Google started already in 2010, Microsoft in 2021 while Amazon has has been active power trader since 2015.

This late start reinforces to me a bit their profile as a laggard in the energy space compared to their peers. This trend in a way is today as well visible in the company’s resistance to granular, 24/7 carbon-free energy (CFE) reporting. While peers like Google and Microsoft champion hourly matching, Meta leads the ‘Emissions First Partnership,’ an industry group pushing to keep the more flexible (and critics say, opaque) annual REC-matching system.

There is a stark, almost industrial irony here: Meta reports ‘Net Zero’ operations, yet 99% of its total footprint resides in Scope 3. The construction of gigawatt-scale data centers and the procurement of millions of GPUs are hyper-carbon-intensive activities that RECs cannot mask. In fact, while Meta’s ‘market-based’ Scope 2 emissions appear near zero, its ‘location-based’ footprint, that is the the actual carbon emitted by the grids where it operates, likely has skyrocketed. Ultimately, Meta’s ‘Net Zero’ claim rests on a foundation of market-based accounting that is increasingly at odds with the ‘hard power’ reality of its physical expansion.”

Massive Natural Gas Investments

Perhaps the most consequential aspect of Meta’s evolving strategy is its embrace of natural gas generation. It is not alone in doing this, it is rather that alternative approaches are not entertained e.g. such a similar sized investments in large renewable developers (Google with Intersect) or at least simply showing the true extend in terms of climate impact. Instead Meta would be talking now about Carbon Capture and Storage (CCS) which for me personally always are a bit of a yellow flags. When I started working in the energy industry 20 years ago, CCS was used to justify new, “modern eco-friendly” coal power plants… It feels a bit the same over again…

So what has Meta invested in the natural gas space?

Project Socrates: The Ohio Archipelago

Nowhere is this strategy more visible than in New Albany, Ohio. This region, served by the PJM Interconnection, is a global epicenter for data centers. However, the PJM grid is facing an interconnection queue crisis, with transmission constraints delaying new load connections for years.

To bypass these constraints, Meta, through a subsidiary named Sidecat LLC, has partnered with the energy infrastructure giant Williams Companies to develop the Socrates Power Generation Project.

The Socrates project is not a standard grid-connected power plant. It is designed as a “behind-the-meter” facility, physically connected directly to Meta’s data center campus in an “island” or near-island configuration. The project consists of two separate generation sites, Socrates North and Socrates South, with a combined capacity of 400 MW.

The choice of equipment reveals the specific operational needs of the facility. The generation mix includes the “Who is Who” in the gas turbine scene: Solar Turbines, Caterpillar and some Siemens turbines. It is a configuration of turbines and reciprocating engines designed to allow the facility to mimic the stability of the main grid while operating independently. By utilizing a midstream natural gas operator like Williams Companies, Meta further secured this generation islands’ fuel security with a direct pipeline access!

This “island mode” strategy is of course a direct response to grid congestion. By disconnecting from the PJM transmission system, Meta bypasses the years-long interconnection queue. It has effectively privatized the energy supply chain.

Project Hyperion: The Louisiana Gigaproject

In Richland Parish, Louisiana, Meta is executing a different but equally massive fossil fuel strategy. It is a $27 billion campus destined to be one of the largest AI training facilities in the world. One may say that the Hyperion data center is Meta’s answer to the Stargate Project of OpenAI.

Unlike the off-grid approach in Ohio, Project Hyperion is deeply integrated with the local utility, Entergy. To support the massive load of this facility, Entergy has received regulatory approval to construct at least three new natural gas-fired power plants.

The Financial Engineering Part

Meta’s energy strategy goes beyond electrons to the capitalization of the infrastructure itself. The scale of investment required for the AI arms race (hundreds of billions of dollars across the sector!) and their very own balance sheet and profitability requirements have lead Meta to deploy sophisticated financial structuring.

In late 2024, Meta entered into a Joint Venture (JV) with Blue Owl Capital, a alternative asset manager. Under this agreement, funds managed by Blue Owl acquired an 80% interest in the entity owning the Hyperion data center, while Meta retained 20% ownership and full operational control.

By holding a minority stake (20%), Meta does not need to consolidate the massive $27 billion capital expenditure on its balance sheet. Instead, it leases the facility back from the JV.

The costs of the data center are then converted from massive upfront CapEx into predictable, recurring operating expenses (lease payments). This smooths Meta’s cash flow profile and preserves its balance sheet capacity for other strategic investments (like huge investments in new Nvidia GPUs).

To make this deal attractive to Blue Owl and the private credit investors funding it, Meta has to provide though a Residual Value Guarantee (RVG). As the lease term is short (like 4 years), credit investors demand longer term certainty for such infrastructure projects. The RVG bridges this gap. Meta guarantees that the property will maintain a certain minimum value for the first 16 years. If Meta decides to terminate the lease or if the asset value collapses, Meta is on the hook to make the investors whole up to that guaranteed value. Guess that would be one way how the off-sheet balance vehicle could come crashing back in the years to come. But again, it is fair to assume that this is structuring and risk is not unique to Meta.

Financial analysts actually have dubbed this structure the creation of a new asset class: “AI Infrastructure-Backed Securities”. Just the naming already evokes some bad memories from past financial crises… Those securities allegedly combine the creditworthiness of a hyperscaler (Meta) with the physical collateral of digital real estate. This then allows Meta and other to tap into the vast pools of private credit and insurance capital that are otherwise typically risk-averse, funneling them into the volatile world of AI infrastructure development. This financial engineering is as critical to Meta’s strategy as the gas turbines, as it ensures the capital tap remains open without alienating public market shareholders.

And finally, “The Nuclear Renaissance”

Probably recognizing that natural gas acts as a bridge but not a destination, Meta has aggressively positioned itself at the forefront of the “nuclear renaissance.” In early 2026, the company announced a staggering 6.6 GW portfolio of nuclear agreements

These agreements consists mainly of three arrangements, a PPA with existing nuclear power plant and two bets on new advanced nuclear technologies with deals with Oklo and Terrapower.

The Vistra Corp PPAs

The bedrock of Meta’s nuclear strategy is a massive partnership with Vistra Corp. Meta has signed long-term PPAs for +2.1 GW of nuclear energy capacity. Crucially, this power comes from existing, operating plants:

• Perry Nuclear Power Plant (Ohio)

• Davis-Besse Nuclear Power Station (Ohio)

• Beaver Valley Power Station (Pennsylvania)

Additionally, Meta is funding 433 MW of “uprates” at these facilities.. These uprates are engineering upgrades to increase the thermal output of the reactor cores. Overall I heard of estimates of 10 GW of such uprates feasible within the existing US nuclear fleet, which is definitely a worthwhile pursuit for all actors and stakeholders involved. One could though safely assume that the extension would have also happened without Meta’s PPAs given the current net capacity needs.

The Oklo Inc Bet

Moving up the risk curve, Meta has further signed a partnership with Oklo Inc. for up to 1.2 GW of power. Oklo is developing the “Aurora,” a fast reactor design that uses liquid metal cooling and recycled nuclear fuel. The deal targets a deployment again in PJM, in Ohio..

The target for the first phase is 2030 which is widely viewed as aggressive. Oklo has yet to build a commercial reactor or receive full regulatory certification for this specific design. Despite the risk, the deal does serve as a massive validation and opportunity for Oklo, which is for sure politically a well placed bet for Meta.

And the TerraPower bet

Rounding out the portfolio is a partnership with TerraPower, an advanced nuclear company founded by Bill Gates. Meta is funding the development of yet another new design. In this case it is a fancy sodium-cooled fast reactor with integrated molten salt energy storage. All to be ready by 2035.

(For sake of completeness: While nuclear grabs the headlines, Meta is also dealing into advanced geothermal energy by partnering with Sage Geosystems to develop a 150 MW geothermal project)

Conclusion

Meta’s current energy strategy reads to me like an ultra-pragmatic response to a threat that has likely become existential to them. Historically, Meta’s approach was passive compared to its tech peers; maybe their passive stance left them with limited market insights, fewer developer relationships, and less sophisticated overall approach to energy procurement. And so the current strategy looked like the only option viable. In any case, like their shift in moderation policy, their shift in energy approach is being executed as well in clear alignment with the strategic priorities of the new US government (e.g. the Oklo bet).

The conversation with Jordi Lopez Francesch, Managing Director, and Pierre Bartholin, Senior Director and Head of Power Hedging & Origination, revealed a wonderful blueprint for how modern revenue manager operate markets dominated by renewables.

The Shift to a Private Equity Mindset

The primary driver behind Nuveen’s strategy is a response to the “cannibalization and commoditization” of traditional asset management. To protect investor returns, Nuveen shifted in 2017 toward a vertical integration model.

Instead of buying de-risked, operational projects, they focus on building platforms from scratch. This allows them to capture the “Alpha”, that is the the value created through development, construction, and active growth.

“We clearly identified that we had to do more activities... to be able to protect the value and the returns for our investors. This is what moved us back in 2017 to start looking at vertical integration of value creation activities.” — Jordi Francesch

By aggregating assets with internal capabilities, they transform a collection of wind or solar farms into a scalable private equity structure.

Reversing the Equation: The Offtaker-Centric Model

Historically, IPPs built a project and then searched for someone to buy the power. Nuveen is reversing this equation. In the modern model, the offtaker and the grid are placed at the center.

Success today is defined by an IPP’s ability to provide clean, resilient, and flexible generation. This means moving away from simply adding more intermittent PV to a saturated grid and moving toward “Green Baseload” solutions.

By understanding the specific needs of the likes of Transmission System Operator (TSO) or the industrial power buyer, Nuveen positions its IPPs (like BNZ or Veridian) as premium, reliable counterparts rather than just another renewable power producer.

From “Set and Forget” to Active Energy Management

One of the most significant shifts discussed in the Pexapark interview was the evolution of risk management. Today’s IPPs face a long list of complexities: negative prices, curtailment risk, higher balancing fees, and the “exit tax” of technology cannibalization.

Pierre Bartholin emphasizes that the “Next-Gen IPP” requires trading capabilities, even if they aren’t engaged in speculative prop trading.

“We really need to move away from the old and classic ‘set and forget’ investment business model... to something which is much more agile. That’s really the next-gen IPP.” — Pierre Bartholin

While Nuveen partners with specialists for physical market activities like balancing and intraday trading, they have internalized the optimization. They act as “optimizers of the optimizers,” ensuring that even when using third-party traders, they aren’t leaving value on the table.

The “20 FTE per Gigawatt” Discipline

Efficiency is the third pillar of the Nuveen approach. To remain competitive, they follow a strict rule of thumb for human capital: 20 Full-Time Equivalents (FTE) per Gigawatt of portfolio.

To maintain such a lean team while managing massive complexity, the IPP must be a “digital-first” organization. This includes:

• ETRMs (Energy Trading Risk Management): To manage and optimize the full set of (net) positions resulting from all their investment and PPA activities.

• Digital Twins: To monitor asset performance and battery optimization.

• Automated Reporting: Using AI and integrated financial systems to minimize manual overhead.

The Role of Storage: “Optimizing the Optimizers”

The current “must do” of the modern IPP is the integration of Battery Energy Storage Systems (BESS). Whether standalone or co-located with solar PV, batteries allow the IPP to maximize the monetization of their infrastructure and deals with some of the direct impacts from high renewable penetration in power markets such as negative prices and curtailments.

The challenge here is not just technical, but commercial. Nuveen’s approach involves being close to new “revenue stacks”, that is balancing the portfolio so that batteries can provide flexibility when solar or wind are being cannibalized by low prices.

Conclusion: The New Blueprint for the Modern IPP

The transition from the traditional energy model to the Next-Generation IPP is not merely a change in technology, but a fundamental shift in business philosophy. Nuveen’s case exemplifies how the “set and forget” approach has become a relic of the past and how IPPs can operate as sophisticated, agile, and vertically integrated powerhouses.

Nuveen’s case showcases a successful modern IPP blueprint built around following characteristics:

• Agility & Scalability: Adopting a private equity mindset means moving beyond static asset management. The goal is to build dynamic platforms that are ready to scale, constantly re-optimizing the portfolio to capture value where others see only volatility.

• Commercial Sophistication: The era of passive yields is over. Modern platforms are to internalize trading-like capabilities and energy management skills. By “optimizing the optimizers,” IPPs ensure they retain the maximum possible value from every electron generated.

• Digital Discipline: In a world of millions of data points, digitalization is the only path to efficiency. By leveraging AI, ETRM systems, and digital twins, the next-gen IPP maintains a lean structure. In the case of Nuveen, targeting a high-performance benchmark of roughly 20 FTEs per gigawatt.

• Client-Centricity: The offtaker and the grid operator are no longer just names on a contract; they are at the heart of the strategy. Providing flexible, resilient energy services allows an IPP to transcend commodity status and become a premium partner in the energy market.

• Specialized Expertise: Success requires a rare blend of adaptability and nitty-gritty financial modeling. High talent density across every vertical, from project finance to energy trading, is the ultimate competitive advantage.

The Bottom Line

To lead in the evolving energy landscape, IPPs must be more than just owners of infrastructure; they must become like virtual utilities - or as we like to call it: next-gen IPPs - that are technologically advanced, commercially savvy, and profoundly flexible. The race is no longer just about who can build the most capacity, but who can manage that capacity with the greatest intelligence.

In a recent conversation on the Pexapark podcast, De Luca unpacked how the rise of renewables, the return of market volatility, and the emergence of “cannibalization” are rewriting the playbook for energy trading and origination.

Here is an exploration of the structural shifts defining the market today.

The Shift from Forwards to Short-term Markets

For decades, the “center of gravity” for energy trading was the forward market which allowed trading and managing price risk one, two, or three years into the future. But as wind and solar have replaced coal and nuclear, the nature of the market has become fundamentally more stochastic.

“The penetration of renewables has changed the market,” De Luca notes. “The interest has moved from the very long-term to the short-term.”

Because renewable generation is weather-dependent and volatile, the real value (and the real risk) has migrated to the intraday and balancing markets.

The Rise of the “Risk Management” Retailer

One of the more surprising trends at Axpo is their aggressive move into the retail space, managing over 1.7 million delivery points for SMEs and consumers.

Traditionally, a utility would run retail operations because of its stickier revenues and as sink of long positions that are otherwise hard to manage in an illiquid market. That still can play a role but from Axpo’s point of view it is a vertical integration strategy based on its risk management expertise. In the wake of the recent energy crisis, the “cost of doing business” has skyrocketed. Increased collateral requirements mean that only players with robust balance sheets and equally robust energy risk management can afford to participate at scale.

The “Cannibalization” Crisis and the Battery Rescue

Perhaps the most significant hurdle for the energy transition today is cannibalization. When the sun is shining and the wind is blowing across Europe, prices often crater toward zero because every renewable asset is producing at once.

This creates the cannibalization paradox:

• High renewable penetration lowers the “capture price” for developers.

• Lower capture prices make new merchant PPAs (Power Purchase Agreements) less attractive to investors.

• Reduced investment slows the transition

De Luca identifies batteries as the essential rescue mechanism. By shifting energy from low-price “surplus” hours to high-price “scarcity” hours, storage protects the value of renewable generation. We are now entering an era where Battery Tolling Agreements, essentially cash-flow protections for storage, are becoming as vital as the solar PPA was ten years ago.

The 90% Problem: A Reality Check on Gas

While batteries can solve the daily “peak and valley” problem, De Luca is candid about their limitations. Most current batteries offer 2–4 hours of storage. They cannot solve for a Dunkelflaute, that is e.g. a week-long period of no wind and no sun across Europe.

“When you don’t have the energy anymore, there is nothing to store,” De Luca explains.

He argues for a pragmatic approach to the “last 10%” of decarbonization:

• The Role of Gas: Currently, gas is Europe’s only viable long-term seasonal storage.

• Economic Realism: The first 90% of decarbonization is the “low-hanging fruit.” The final 10% could cost five to ten times more.

De Luca’s takeaway is clear: To keep the transition affordable for the taxpayer, we must utilize existing gas infrastructure while searching for long-term storage breakthroughs, rather than succumbing to “carbon fundamentalism” that could strand essential assets.

AI: Speed Over Precision

Finally, De Luca demystifies the role of Artificial Intelligence in trading. While many expect AI to revolutionize how we trade, he sees it as a tool for velocity.

The fundamental theories of risk management remain consistent: De Luca compares them to the Carnot cycle in thermodynamics. AI’s true value lies in its ability to solve complex optimization problems in seconds rather than hours, allowing traders to react to a volatile grid in real-time.

Decentralized, resilient and risk management driven

As Axpo expands into other geographies and markets, the strategy is one of decentralized resilience. By building local expertise in 32 different countries, the group aims to insulate itself from global trade tensions while “copy-pasting” and honing in on their their sophisticated risk management expertise and system

The recent announcement made on January 14, 2026, by Exeltium marks a memorable moment for the French industrial landscape and the French power sector. By securing a massive new power agreement between EDF and the Exeltium consortium, France is effectively insulating its heavy industry from the volatility of electricity markets. This deal is not merely a supply contract; it is a strategic construct designed to secure a competitive and reliable electricity price for industrial production on French soil for the next decade.

The Structure: What is Exeltium?

To understand this announcement better, one must first understand that Exeltium is not a traditional energy supplier. It is a sophisticated consortium of “electro-intensive” industrial giants, including household names such as ArcelorMittal, Air Liquide, and Solvay. These companies share a common need: massive ‘baseload’ quantities of electricity to power their factories.

The mission of Exeltium is to pool the collective purchasing power of these giants to secure long-term, stable, and low-carbon electricity directly from EDF’s nuclear fleet. Unlike a standard consumer relationship where a customer simply pays a monthly bill, Exeltium operates on an industrial partnership model. In this setup, the industries act more like co-investors than mere clients. They provide EDF with significant immediate cash flow, which in turn grants them the long-term price security required to maintain global competitiveness.

The News: The January 2026 Agreement

The agreement confirmed today stipulates that EDF will deliver an additional 30 Terawatt-hours (TWh) of electricity to Exeltium shareholders, extending the partnership through April 30, 2034. The timing of this announcement is no coincidence. The ARENH mechanism (which is the regulated system that historically forced EDF to sell cheap nuclear power to competitors) officially expired at the end of 2025.

Without this new deal, these industrial players would have faced a “pricing cliff,” suddenly exposed to the whims of the open market. This agreement ensures a transition into the post-ARENH era, providing the necessary bridge to keep these factories operational and competitive while the new national energy regulatory framework takes hold.

Pricing: The Logic of the Upfront Investment

While the exact price per Megawatt-hour (MWh) remains a closely guarded commercial secret, the financial logic behind the deal is straightforward. The cornerstone of the agreement is the “avance en tête,” or a massive upfront payment made by the industrials to EDF. For the industrial members, this prepayment effectively “buys down” the future price of their power, securing a lower marginal cost per MWh for the next eight years. For EDF, this capital provides a vital “war chest” to fund the EPR2 nuclear program and the essential maintenance of the existing fleet, known as the Grand Carénage.

In terms of estimated price points, the context of 2026 suggests a highly favorable outcome for Exeltium members. While the French government and EDF have targeted a post-ARENH average nuclear price of approximately €70/MWh, Exeltium members likely enjoy a significant discount due to their upfront financing and long-term commitment. It is estimated that their effective price hovers closer to the €60–€65/MWh range. This is particularly striking when compared to the wholesale market (Epex Spot), which is currently trading around €112/MWh, providing these factories with a massive competitive shield against market volatility. For reference, Pexapark assesses the fair value of 15 Solar PPAs with CODs in January 2027 at 37.4 EUR/MWh, while the transactable price range is between 59.10 and 74.10 EUR/MWh as per Jan 13, 2026. For a Wind PPA, respective figures are 50.9 EUR/MWh on fair value and a transactable price of 69.10 EUR/MWh.

Why This Matters

This deal can be seen as a cornerstone of “Souveraineté Énergétique” (Energy Sovereignty). By locking in nuclear power, industries like steel and chemicals can prove their products are “low-carbon.” This is an advantage as the European Union moves forward with carbon border taxes, rewarding those who have decarbonized their supply chains.

Furthermore, the predictability of this agreement is a strong asset. Industrial companies generally fear volatility as much as paying higher prices than their competition. Having fixed energy costs until 2034 allows these companies to greenlight multi-billion euro investments in French infrastructure, focusing on development and the electrification of their processes rather than crisis management. For investors and stakeholders, this news represents a major “de-risking” event, guaranteeing that these industrial pillars will not be forced into shutdowns by future energy price spikes.

The scale of this deal (30 TWh) likely will crowd out some private market sector activity and effectively set a price benchmark. Potentially, much smaller Solar PPAs for those industrials can leverage the foundation of this structure to cover any remaining “peak” daytime needs.

Takeaways

The interview highlighted key shifts for investors, operators, and regulators in the US storage sector:

Market Design & Regulatory Shifts

• ERCOT is Ground Zero: The upcoming Real-Time Co-optimization plus Batteries (RTC+B) in ERCOT is a major structural change. By co-optimizing energy and ancillary services every five minutes, it will open up new, flexible monetization and trading opportunities, even if it leads to lower overall energy prices.

• Policy Inconsistency: A critical need exists for regulators to standardize capacity accreditation (ELCC) across ISOs. A four-hour battery receives full capacity credit in CAISO but only 50% in PJM, demonstrating a disconnect that hinders investment.

• ISO Strategy Differences:

  • CAISO is dominated by long-term Resource Adequacy (RA) contracts, providing 60-70% of revenue and requiring strict compliance management.

  • ERCOT is a fully merchant, no-capacity market that has shifted from ancillary services to being a dynamic day-ahead real-time arbitrage play.

Investment & Growth Trends

• Storage Leads Investment: Post-IRA, storage has become the lead investment case (not just an add-on) for new hybrid projects, driving decisions on sizing and technology.

• Rise of Behind-the-Meter (BTM): The market is finally seeing large-scale BTM facilities and microgrid solutions, with projects of 100+ megawatt scale starting to get financed and deployed.

• Monetize Existing Infrastructure: A major opportunity for faster deployment is adding storage to existing solar, wind, or thermal facilities to take advantage of existing interconnection capacity and queues.

Advice for IPPs/Developers

• Operational Mindset Shift: IPPs traditionally focused on development and finance must transform into organizations with a high-performing operations and trading function to manage the dynamic, complexity of storage revenue.

• Portfolio Diversity is Key: IPPs should build portfolios with diversity across markets and off-take structures, treating them like a retirement fund: CAISO offers stable RA returns, while ERCOT offers higher-yield, merchant exposure.

• Be an Early Mover: Early movers in developing ISOs can capture value streams (like ancillary services) before high deployment leads to market saturation.
  
  Luca Welcome to the second part of the Pexapark podcast, where today I’m happy to have with me the same job title, co-founder and CEO, it is Tom Thunell from Tyba, which is a solution provider in the battery optimization space in the US. I’m happy to have him here to discuss all things US battery storage market. Hi, Tom.

Transcript

Tom Great to be here and thanks for having me on.

Luca Actually, I’m not really a Chief Operating Officer. Basically, I just happened to have this title when we started the company with two. So, are you a real COO?

Tom I think I’m the jack-of-all-trades person. So, I have some great co-founders with deep energy market expertise and engineering expertise. And we found a good balance around core competencies. So, I really focus on leading our commercial efforts at Tyba.

Luca Yeah, Tom, first let’s start with who are you and who is Tyba? What is Tyba up to?

Tom Absolutely. So, as you mentioned, Tom Thunell, co-founder and COO of Tyba. Just as a little personal background, I’ve been in the energy sector for a decade plus, working on developing and operating some of the first energy storage projects within the US.

Then right before starting Tyba, I worked at Google’s X division, working on different telecommunications-related initiatives, and leveraging some of those early applications of neural networks, artificial intelligence, to manage distributed systems for critical infrastructure. So, that definitely served as an interesting learning ground for some of what we’re now doing at Tyba.

And then just Tyba is a bit of a background. So, a five-year-old company, we support companies that both develop and operate standalone and hybrid storage projects with a range of forecasting, optimization, and trading tools.

On the development side, we provide a range of simulation tools to help companies hone an investment case behind projects and ultimately finance those projects. And on the operating side of things, we provide optimization and risk management tools for companies that are trading battery assets day to day. So, we really work across the board with distributed generation (DG) developers, utility-scale developers, IPPs, and utilities.

💡 Tyba’s Origin Story and Evolution

Luca Tell me your origin story. How did you and your co-founders get to, what was the spark? What led you to found Tyba?

Tom As I mentioned, from a background perspective, I worked on developing and operating some of the first storage projects within the US about a decade ago. And like all things, necessity is the mother of invention. At the time, as you were doing this, looking at different markets, different programs, trying to navigate how does storage operate within these? What’s the value case behind storage? How do we convince financing partners that this is actually an asset class that they should invest in? And then once all that happened, we’ve got to go run these assets day to day. In the real world, things look a lot different than maybe an on-paper exercise.

So, just really from that experience, it kind of set the foundation for Tyba. One of my co-founders worked at that company with me, and we just kind of lived that pain firsthand, being the folks responsible for understanding those markets and building those tools and capabilities.

We saw all the tools available to companies working in the storage space were from the old world. It was based on a solar/wind type underwriting and operating model. You’ve got a production profile, you’ve got a PPA rate, boom, there’s your revenue expectations. And it goes into operations with a little bit more of a passive commercial asset management strategy. And we realized that that was not going to work for energy storage. We had a strong thesis that this was going to take off and become the critical grid stabilization resource. And so, I guess we were foolish enough to set out and decide to start a company and think that we could build great tools to help companies really scale what they’re doing and help grow the energy storage market.

Luca It has scaled enormously the industry. I was just wondering, is the initial business model you set out still the same? If you could describe that.

Tom I mentioned earlier that we have solutions covering different phases of the life cycle of a storage asset. Our first product that we worked on and developed was really focused on that pre-operation side of things: long-term simulation tools really geared towards renewable developers to help them understand the technical and commercial trade-offs of different project designs.

As we evolved with our customers and as their projects became more mature, moving through their development pipeline and soon reaching operations, the natural pull we were receiving and asked was, “Hey, you’ve really helped me understand market approaches, ways that I can leverage the storage. Can you help me manage and optimize this day to day?” So it was really a natural progression for us. And we launched our Asset Operations Platform, really focused on day-to-day optimization of assets, about two years ago and have really scaled that very quickly. And now we have over three gigawatt hours of operating assets and four different ISOs that we’re working in there.

📈 Big Trends in US Storage Markets

Luca Four different ISOs. Tell me a bit, what do you see as the big trends in US storage markets? Is it possible to say across the markets, these are trends, and then maybe are there very different market-specific trends given different setups of the ISOs?

Tom A lot to unpack there, but maybe we’ll cover some of my favorite trends across what we’re seeing from a regulatory evolution, market evolution, and market players perspective.

Regulatory Evolution: ERCOT’s Real-Time Co-optimization

Tom What’s specifically within the ERCOT market, they’re rolling out a new market structure within the next month called Real-Time Co-optimization plus Batteries (RTC+B). They’re evolving their market structure to co-optimize energy and ancillary services every five minutes in real time. Legacy approaches procure a lot in day-ahead, which is operationally binding, and then you do some kind of balancing in real-time energy. This is a major market evolution that really, our belief is, will benefit flexible resources, and storage is the most flexible of those resources on the grid right now.

We really think that this can serve as ground zero for other ISOs to adapt new market rules and market structures to further value flexible resources.

Luca It is a very nerdy technical change. Try to explain the significance, or why you think this could have reverberations beyond ERCOT.

Tom What is ERCOT’s goal with this market structural change? It’s looked at how its markets operated. It’s seen different issues and challenges related to reliability, emergency events, very high price scarcity events that it believes with better, more real-time grid management could be avoided in the future. From a market structure perspective, as grids have more renewables come on, all this more large load, that kind of real-time management problem is becoming more challenging for ISOs. I think ERCOT, with all the renewables that have been deployed and all this large load, other ISOs will start experiencing some of those challenges over the coming years.

Luca Putting myself in the shoes as a potential owner, what does it mean for my revenues?

Tom From an overall generator perspective, not specific to storage, ERCOT believes that this will drive lower energy prices, all else equal, versus its current market structure. However, what it does open up is new trading and monetization opportunities for assets, and in particular, energy storage assets.

ERCOT is now introducing a concept for ancillary services similar to day-ahead energy where positions are financially only binding. Energy traders now have the opportunity to make money through day-ahead ancillary service positions.

Then from a real-time flexibility perspective, as a storage resource, where you’re very much able to every five minutes change your operating strategy (move from selling real-time energy, charging in real-time energy, providing an ancillary service), it gives you a lot of flexibility to move between products and always provide the most valuable service to the grid. Energy storage is best positioned to take advantage of this new market structure and is the least impacted by those lower overall prices. We really think it’s about being dynamic and being flexible, and batteries will really benefit from that.

Market Trends Post-IRA

Luca Some other trends you’re seeing, maybe if we take even a higher macro view going beyond our code.

Tom Post-IRA repeal, a shift that we have seen is as opposed to maybe the renewable asset being the lead from an investment case and storage just being an add-on or kind of afterthought, storage now oftentimes being the lead from an investment case behind new projects, especially for co-located hybrid solutions. We’ve also seen the relative size of storage when paired with generation starting to increase, as well as additional duration.

Another key trend is what I would call the rise of behind-the-meter. We are actually seeing these large behind-the-meter facilities and microgrid solutions moving forward—projects like 100 megawatt plus type systems starting to move on to the grid. This is an interesting evolution as the C&I behind-the-meter microgrid space has been really small to date, at least within the US market.

🌍 Operational Differences Across ISOs

Luca Zooming in on the market level, where would you see the biggest differences in just from an operational point of view? Does this require a lot of bespoke ISO setups on your side?

Tom Every market has its different rules and with that, there’s different value streams that are available. If we look at two of the more evolved markets—CAISO and ERCOT—there are some similarities, but some major differences.

• CAISO: For a storage resource, probably the leading value case is the long-term Resource Adequacy (RA) or capacity contract that the resource has. That can often be 60 to 70% of the revenue for a storage resource, with the balance being how it operates day to day in the wholesale market. From an optimization perspective, priority number one is making sure you’re staying compliant with all your RA obligations, and then layering on a smart wholesale market bidding and participation.

• ERCOT: This is a fully merchant, no capacity market. It requires a very different trading strategy and approach. Two years ago, it meant sitting in ancillary services. Fast forward two years, it’s much more a day-ahead real-time arbitrage play for battery resources. So you really need to be very active from an accurate forecasting and optimizing perspective to capture that value.

Luca How much customization do you need market by market to cover additional markets for your clients.

Tom Given our origins supporting companies as they were going through the development and underwriting phase, we’ve got broad-based knowledge of these different ISOs, market products, and revenue opportunities. That allowed us to develop a more flexible system architecture that allows us to quickly adopt what we’re doing from an optimization and data architecture perspective to incorporate new ISOs. Now, each will have different dynamics around what drives prices. So from a price forecasting perspective, that piece of our optimization solution can look a little different. Our data science and AI team will tweak and hone that market to market, node to node.

🔮 Opportunities and Policy Wishlist

Opportunities for Investors and Operators

Luca Where would you see the biggest opportunities for investors and operators in the foreseeable future? Let’s look at the timeframe of the next year, 18 months.

Tom A couple of areas:

1. Monetize existing interconnection capacity: Given the challenges companies are having with long interconnection queues, there’s an opportunity to add storage and take advantage of existing infrastructure, like a solar/wind or thermal facility that’s not running 24/7.

2. Be an early mover/first mover: How can you be ahead of the market and take advantage of those first mover, early mover advantages across other ISOs before things like ancillary services become saturated from high deployment.

Policy Wishlist

Luca I mean, you mentioned the market design change in ERCOT. If you had a wish list for regulators, policymakers, what would be the changes you would hope for to see enacted that could help the industry?

Tom As we look across different ISOs, especially those with capacity markets, there are highly varied ways that they are attributing value to storage from a capacity accreditation or ELCC (Effective Load Carrying Capability) perspective.

I’ll use an example. A four-hour battery in CAISO gets full resource adequacy or capacity credit. However, in PJM, it gets 50%. There seems to be a disconnect across ISOs around how they’re thinking around the reliability that storage provides. At this point, storage can be very high reliability, high 90% uptime. System peak loads are typically one to two hours. Why are we still discounting the value of that dispatchability and reliability across a bunch of other ISOs?

I think a big change would be how these grid planners are attributing the value of the dispatchability and reliability of storage, basically learning from each other of what works best.

🔄 Adjusting to the Storage Business Model

Luca Let’s shift the view and look a bit at the customers or the owners and operators of storage. If you look or were to advise an IPP today who is maybe more used to the generation business, what are the shifts they need to do? How are they adjusting to the storage business model changes?

Tom For the bucket of renewable energy IPPs, this is a big mental model shift for them. Their core competency has been development, financing, strong EPC, and strong relationships with PPA offtakers. Now, as they’re adding storage, there’s a whole new set of things that become very important: power markets expertise, trading expertise, commercial and technical asset management expertise. They have to shift that mindset from a development and finance-focused organization to a high-performing operations and trading function. This can mean investing in new functions within the organization or finding partners like Tyba to support them.

For IPPs that come from a background with thermal or dispatchable assets, they get really excited because they know how to trade in markets, but now it presents some different operating considerations than just saying ‘go or no go’ on a peaker.

Luca What would be your recommendation if an IPP were to start new and build a storage portfolio?

Tom

1. Start with your core competency and double down on that. Be honest with yourself: are we really good traders, good at hedging, or good at structuring offtake? Figure out that core competency and focus on it.

2. Diversity is a good approach as you’re building out a portfolio. Diversity across both markets and off-take structures. Think about this like a retirement portfolio. You want to have some different risk profiles and return profiles. CAISO could look like a very stable return opportunity with long-term RA contracts, whereas an ERCOT storage project could maybe be your higher yield, higher risk type project.

3. Be ready for variability. If you’re an IPP that is going to continue to own that merchant exposure, be ready to understand there’s going to be variability month to month, year to year, in that cash flow and return profile.

Luca It’s been exciting to see the financialization of the storage market start to accelerate. Thanks, we covered a lot. That was super cool to have you on board and sharing your insights from the front lines of the battery optimization solution space. Thanks for coming to the show.

Tom Great to be here. Thanks, Luca.

• Declining capture factors
  Solar capture factors have fallen below 60 percent as generation floods markets. More energy at the same hour means lower realized prices for standalone solar.

• Rising negative price hours
  Germany already records more than 450 negative price hours per year. Curtailment risks and imbalance costs are now material parts of project economics.

• Higher volatility
  Increasing day-ahead spreads create value for assets that can shift energy across hours. Storage converts volatility into revenue.

• Grid connection bottlenecks
  TSO queues are clogged with over 250 GW of requests across German TSOs alone. Co-locating batteries with existing or approved solar improves the case.
  

Together, these trends make storage less an “add-on” and more a structural complement to solar. It stabilises revenue, improves grid compliance, and helps projects clear the queue. One could even argue that solar is becoming an add-on to storage...

Source: Pexapark, BloombergNEF (2025), The Climate Group. Notes: RE100 figures based on worldwide demand for European companies.

The Deals That Matter Now

Hybrid PPAs from Co-Located Projects

Co-location involves combining multiple technologies at a single site, such as wind and solar, or solar paired with battery storage. Traditionally, pricing was based solely on energy delivered. Now, it is necessary to evaluate and price the marginal value added by co-location, the interactions between different resources, and the premium associated with reduced curtailment and improved grid capacity utilization.

Battery Offtake Agreements

Battery contracts can take various forms. Tolling contracts delegate operational decisions to the operator, merchant sharing agreements allocate both the upside and downside, and capacity-based deals pay for guaranteed availability. The frameworks for valuation and pricing in these contracts differ significantly from those used in pure energy agreements.

Stand-Alone PPAs

Despite a clear trend toward increased adoption of BESS and hybrid PPAs, the market for stand-alone PPAs remains significant. However, the prevalence of “plain vanilla PPAs” has diminished as renewable markets mature. Transaction price ranges have expanded, requiring deeper analysis to understand the impact of negative prices and curtailments on price and value. Additionally, in many markets balancing risk is now handled completely differently than just 12 months ago.

Valuation Framework and Risk Considerations

The Pexapark Renewable Valuation Framework for PPAs continues to provide a solid foundation. However, the importance of the “middle part”– understanding risk and projecting future realized prices – has increased substantially!

With the introduction of BESS as a new asset class as well a new set of valuation frameworks had to be developed. And they can vary greatly between different price zones, mainly due to differences in ancillary market designs.

Sample Multi-Market Revenue Model

How Pexapark Price Data Supports Valuation and Pricing

The Pexapark platform provides several data inputs that are essential to the valuation and pricing of PPAs, hybrid PPAs, and BESS deals:

• PPA Fair Values: The fundamental reference for valuing a specific PPA structure, the most basic unit.

• Transactable Price Assessments: Market-validated price ranges for given PPA structures, indicating real hedging costs. This data also tracks market trends, such as convergence with fair value or movement influenced by auctions.

• Negative Price Impact: Evaluations of potential uplift from negative prices within PPAs.

• Co-Location Premiums: Assessments of the fair value premium for co-located projects.

• Imbalance Cost Indicators: Indications of imbalance costs, currently available on an entire fleet basis, providing an initial reference point.

• Toll Price Ranges: Current data on toll price ranges in Germany, with future expansion to additional markets planned.

• Multi-Market Revenue Projections for BESS: Forward-looking values for BESS across day-ahead, intra-day, and ancillary service markets.

Depending on the market, this “middle” segment can account for up to 60% of total costs in a given PPA! With balancing costs reaching mid to high single-digit figures, and with ongoing fluctuations in total power structure price ranges and negative price risk, these data sets have become significantly more valuable over the past eighteen months.

This analysis only covered the comparative revenue aspect; IRR assumptions were excluded. Source: Pexapark, GME (2025), MASE (2025), TERNA (2025).

Main Takeaways

1. Evolution of PPAs:

   • The interest in solar PPAs has decreased, but industrial customers still have a strong interest in green electricity.

   • Engie is focusing on multi-technology PPAs and incorporating flexibility to match downstream consumption profiles with upstream generation.

2. Role of Batteries and Flexibility:

   • Batteries are crucial for adding flexibility to the energy market, but their integration involves complex value stacking and opportunity costs.

   • Engie is exploring hybrid models that combine tolling agreements with merchant exposure to manage risks and optimize returns.

3. Market Trends in Germany and Poland:

   • Germany is a hot market for battery storage and flexibility solutions, while Poland is emerging with increasing volatility and need for flexibility due to regulatory changes.

   • The market is seeing a shift from pure merchant batteries to more structured tolling agreements driven by financing constraints.

4. Utility Role and Complexity:

   • Utilities like Engie play a vital role in managing risks and structuring deals between upstream and downstream markets.

   • The complexity of the energy market is increasing, and utilities are well-positioned to handle this complexity due to their experience and risk management capabilities.

Transcript

Luca Pedretti: Welcome to the second part of the show where I’m very happy. Finally, after months and months of trying to have with me, Katrin Fuhrmann. Katrin is managing director of energy supply and energy management. It’s called, I think, right now for Germany and Poland.

Very welcome to the show.

Katrin Fuhrmann: Finally, thank you. I’m super happy to be here. I see you’re making fun of my unavailability of the past. I think it was very tough to get ourselves together, but I’m super happy that we have finally.

Luca Pedretti: We finally made it. Yeah, we finally made it. And we want to talk about all the hot topics from the viewpoint of a utility and trading house, but Katrin first. Who are you and what do you do?

Katrin Fuhrmann: But as you said, I’m managing director of supply and energy management for Germany as well as for Poland. And what are we doing is we are basically the Risk Manager for our internal and our external assets, as well as providing supply, and especially green supply, for our downstream customers, Industrial Tech customers, and manage the risks in between cool and you have been doing this for years and years and years, exactly, I’m with energy since, don’t let me lie, 2011 I think 201114 years.

Luca Pedretti: Well, some time, right? Yeah, time, time passes, and the market is changing. So what were the big topics when you started at Engie?

Katrin Fuhrmann: That’s a very good question. Probably the carbon market at the time, and the volatility that was coming from the carbon market. I was still remembering the drop of the carbon market to two euros and then going back up to 30, I think that was, that was the time when I started.

Luca Pedretti: That’s the drop, and then actually the going back up of the carbon markets. So today, if you just could give us a bit of you, like, how big is Engie? Like, how big is your portfolio? And what type of products are you offering, especially also to the sell side, like investors into renewables and best our portfolio. Let’s focus on Germany and Poland, because I do know it best, European and worldwide, we are a lot bigger. Obviously, in Germany, we have a portfolio on the renewable side of 5.5 Gigawatt installed capacity that is encompassing solar winds and onshore wind as well as offshore winds. And in Poland, we’re managing portfolio round about two gigawatts installed capacity, and it’s in both countries, internal and external assets. What are we offering. We are offering from pure balancing. So basically day ahead, day ahead products. So pure balancing products up to fixed price, products payers produced, as well as in between, where we are basically spreading the risk between the two parties. A bit more. Can we still get long term PPAs from Engie in Germany and in Poland. Yes, you can, well, the share of utility PPAs has gone dramatically down. It’s a bit rebounding, but that’s still an active business for Engie. It is. It is an active business, right? I mean, we can, we can definitely say that the interest in solar PPA has has gone down, if you’re driving towards this question, I would say definitely has gone down on the other side, on the downstream. So let’s say the industrial customers, they still have interest in green electricity,

and even more, in 24/7 not everybody, but the interest is still there in Germany. You have several markets on the PPA side, right? I mean, you have the onshore winds that is more competing against the subsidy level. You have the old wind parks that are falling out of the subsidy levels, where you are mainly either buy the electricity via fixed price contracts or floating contracts, together with the guarantees of origins. And on the other side, you have the PV. With the PV, I would agree it is getting more and more difficult to basically get this in our books, as well as to our downstream customers. But more and more we are trying to combine that with multi technology, PPAs, as well as with some flexibilities included, that’s exactly what I wanted to hear. So can you explain a bit how that works? So we see, of course, the slowdown in in standalone solar PPAs in Germany. So can you describe a bit how this new future could look like, of combining with best and other technologies.

Katrin Fuhrmann: It’s a, it’s a very nice question. I think it’s at the heart of of the value proposition of Engie. For me, it is really to see what, what brings the value for the asset owner, for our own assets, but as well to the customers, I think it’s quite clear that just selling payers produce or pay as forecasted solar profiles is something that nobody wants to get in their books, nor the utility, nor a trader, nor a downstream customer. So it’s really for me, trying to match the downstream consumption profile step by step with a multi technology portfolio on the upstream that is the first step. So it’s a multi step approach. The next step is really to see what matches best in Germany. It’s a matter of combining onshore wind parks with solar, as well as with offshore whenever it is feasible, and also combining different locations. When you’re combining an onshore park that is close to the North Sea and an onshore Park, let’s say that is close to Cologne, it will already have a de correlated effect. And the next step is really to add some batteries into the whole picture, and that can be batteries that are behind the me too, but not necessarily. It could also be a battery that is sending somewhere else.

Luca Pedretti: So you start with the demand side, so you look at the profile from the customer, and then you work backwards Exactly. And when doing this, would you consider all sort of assets, so they don’t need to be necessarily owned by Engie, but could be third party assets? Yeah, we are basically combining both. I mean, we are always using our own asset base in all the countries where we are active, but we are also using external assets to to add on to what we need. Yeah, and do you see willingness to pay? I mean, it costs more to go green, I would assume. Do you see willingness to pay to push up the CFE score, carbon free energy to, let’s say, 80,90%80,90 \%80,90% or higher in those type of deals? Let’s be honest. I think the hyperscalers the tech companies, are the ones that are driving these markets. But for me, the 24/7 and the CFE questions and the whole bust about it, or let’s say, the the hype about it is is a lot more than just the hyperscalers in the Tech.

Companies. It’s about starting to talk about it, and maybe also to start to just start small. I think in order to sign a 24/7, CFE contract, you don’t need to go to 90,95%90,95 \%90,95% from the beginning. That is very important. Whenever I talk about it. For me, it’s super important that it is okay to start with 70%70 \%70% it is okay to go step by step to a 90%90 \%90% target in 10 years. Why not? Because, indeed, as you said, going for 90 above 90%90 \%90% CFE targets is not something that is for free. It is something that can be costly in a one in different ways. Either you’re oversizing your PPAs, or you’re adding batteries to the story. And there is, there are some costs involved to it. So therefore, starting at the very beginning with transparency, really thinking about hourly matching, using tools that are showing when is my portfolio producing and when do I consume? Is the first step you need to do, and it’s not starting with 95%95 \%95%

Luca Pedretti: Thank you. I agree. But how do you approach pricing then, like, let’s say, with corporates or CNI, we could all agree on what the value of a solar profile is or a base load. So how do you approach going from, okay, this is your CFE score, and now let’s take it 10%10 \%10% up. What is the fair price then for this additional green hours, how do you how do you approach this? How do we approach it? But as I said, I mean, we are basically really combining. We are combining also the cost of the batteries. I mean when the battery? I mean when, when we go into the market, either internally or externally, the battery flexibility has a price. If you want to buy the flexibility and take it into your into your portfolio. And that also means that in order to shift the electricity, because that is what the battery in the end is, right? It is shifting energy from one moment in the day to another moment in the day has a value, and that value you’re adding up to the costs of a customer that needs to pay. I agree. But would it be oversimplified to say I’m a corporate This is my profile right now. That’s the German CFE score. Now give me some solar. I know what it costs, 38 then I have a recital portfolio. And now just give me 10%10 \%10% more green. What does it cost? Five euro. Like, can this be done in that simple manner, or is it a complete different show?

Katrin Fuhrmann: I think it’s a bit different, right? Because when you’re looking, when you’re looking at the battery, a battery has a value. It is when you’re when you’re buying the flexibility the battery has, let’s say three value pockets in most of the markets. It’s the day ahead, it’s the intraday, and it’s ancillary services. And where you have CRM systems, it is the CRM on top of it. When you are using a battery purely for shifting or partly for shifting electricity from one moment to another moment, you are taking away some sort of flexibility away from that battery. So the normal just saying that it is so easy to add a simple five euros on top of your costs is not that easy, because on a trader that is taking the risks is really buying the flexibility and taking it in our books, and then it’s a matter, okay, how much flexibility do I actually take away that I cannot use anymore in the intraday on the ancillary markets? It’s an opportunity cost you need to take into I totally agree and acknowledge the complexity, and I wish we had like an hourly green price. But I guess that’s a far flung vision so far. That’s a dream. That’s a dream you touch up on best so I guess you already operate. You’re very active in the best off take market. Can you explain a bit like, how you see German and Polish best off? Take market, evolving.

Katrin Fuhrmann: Germany is already the hop the hot the hot topic in the best market, Poland is looking to become one, but it is really something. Yes, we are active in both markets, mainly in Germany. We have our first, tolls already signed.

Luca Pedretti: I think what is, what I always like to frame whenever we are talking about the markets in Germany or generally speaking, on the tolling market, I think it’s very important that we do not compare a payers produced PPA with. With a tolling agreement. For me, it is something else. When we are buying the flexibility from a battery, it’s really a flexibility purchase agreement, in a way you are buying term of energy, flexibility purchase agreement, I see you, yeah, I see you’re very much spreading this definition. Yes, I think that is what it is. Because you’re really buying the option to use in assets however you want to do use it. It’s like a it’s like, like tolling on the on the motorway. You’re basically buying the rights to use as long as you wish that motorway. And the same is on a tolling agreement for battery you’re you’re basically buying an option to use that assets in any market you would like to use it in. So FBA flexibility purchase agreement is Engie’s definition of a classical toll, where you buy the full ride to the batteries various revenue streams. That is one way. So the one way is doing 100%100 \%100% tolling agreement or flexibility purchase agreement. But, of course, there, there are other ways, but we have been seeing were fully merchants agreements, and also banks that were financing those batteries on merchant exposure. I think bit and bit, this is actually changing in the market. And as soon as the tolling agreement started to come into the markets. In the beginning, when we started to do those tolling agreements, or the flexibility purchase agreements, it was always about 100%100 \%100% more and more. What we are seeing is also that the flexibility purchase agreement is only about a certain percentage of the assets, and the other part is supposed to stay merchants in order to keep a certain upside still in the market that everybody is dreaming about. I mean, that is, that is what we are seeing. So for me, it’s really there are three options, either you’re staying fully merchant, either you are tolling 100% of your assets, or you basically do a sort of hybrid setup, which, of course, technically, is bringing some challenges and complexity into the market. And the setup would you I mean, when we look back eight years when the PPA wave started, a clear model emerged, mainly also from a financing perspective, the investors wanted to have 10 year secured revenues, they got their leverage. Is there the same driver on on the best side, where this is driven from financing that investors want to have, I don’t know, like, on average, five or six year secured revenues, or how it will there be, like, a standard tolling contract, which everyone pursues now.

Katrin Fuhrmann: You’re now, you’re really dreaming your standard tolling agreements, whereas we do not even have a standard PPA agreements up to now. But I’m not so sure. I think, yes, the tolling agreements have emerged due to financing constraints from the banking sector, as well as because they knew it from the PPA market. I also see that more and more those pure Merchant Terms is something that you look at. I mean, in the end, it’s a it’s a risk rewards that you need to look at also as an investor. And either whenever you’re bringing depth into it, and you need to financing partner, I think the financing partner will always try to get a certain certainty in the cash flows, in when you’re looking at the ones that bring in pure equity, I think there you still see some pure merchant batteries out there, flexibility assets, but more and more we are getting, as I said before, to a sort of either 100%100 \%100% tolling or a hybrid tolling due to financing constraints. Yes, I would see like that. Could you comment like on the average tenor, what you would be seeing in the requests or deals?

Luca Pedretti: I think we are seeing between five and 10, five and 10 as requests, as requests, and realistically closeable. Five to seven, five to seven. Could you shed some light on how you see co locations, where we discuss standalone PPA, we discussed the big CFE deals and standalone best. So how about colocation? That’s a that’s the other hype out there. Currently, I’ve also just seen, I don’t know whether you have seen this, the overall subscription of the of the auction of colocation in Germany, the subsidized Co Location. I’m still a bit hesitant on the.

Katrin Fuhrmann: The on the pure merchant Co Location, because you’re at least with the regulation that we’re having out there currently in Germany, you’re quite constrained in what you’re allowed to do and not allowed to do with those assets, and very often you are not getting an additional grid access for this battery, so you’re basically limiting your assets in order to do some shifting in time of the energy. And for that, I’m still a bit hesitant whether this is going to come big time in the PPA market. I would hope it does, because it will bring some further energy in the in the PV market again. So yes, we see this. Yes, we are negotiating some of those contracts and deals. But I think it’s not so easy as it sounds. The devil lies in the detail. I agree, and the regulation is not helping. I agree. We talked a lot about the Germany, which is Europe’s largest market, a huge market in Bess, as you mentioned, but you also cover Poland. So what’s going on in the polish off? Take market both PPA and Bess. It’s, it’s starting to heat up. It’s starting to be heat up on the other side, I think we should not underestimate that the market depth in Poland is not as big as in Germany. So also your hedging possibilities on your exposure that you’re that you’re having, is a lot smaller. So the risks you’re taking whenever you’re doing a tolling or a PPA is is bigger definition. I think also, regulation is not that clarified. I do know in Germany, we have a lot of open points currently on the flex side and the PPAs, but I think in Poland, it’s even more uncertain. So there’s more risk on the regulatory side. On the other side, we do see, especially now with the change of the of the balancing rules, with the change of Picasso, we are really seeing a huge increase on volatility, on the day ahead market and the balancing market, so the need for flexibility in Poland is going to be huge. It’s going to be huge because most of the existing assets out there is still based a lot on coal.

Luca Pedretti: Renewables are increasing by every year, so without any flexibility, this market will have a hard time to balance itself, and that is what we are currently seeing. Already today, we are building renewables and also investing in batteries in Poland, and we are, let’s say, in the first negotiations, perform some tollings, but we have not closed any tolling agreements on the PPAs, yes, but on the tollings, we are not that far yet, but we are doing, hopefully, our first deals soon. Katrin, the public perception over the last year was a bit PPA, that this is all corporate. The utilities don’t play really a role anymore public perception, and now it feels a bit utilities are back in the game with flexibility, but also on the PPA side, I would just be Is this because of things becoming more complex and you need to orchestrate more? Or what is your take on on the role of utilities in in the off take market.

Katrin Fuhrmann: I think we have been discussing this already a couple of years. I don’t know, at what kind of events, what is actually the role of utility. And I think already in the past, I’ve been saying, you know, I’m convinced there will always be a place for utilities, simply because utilities are the ones that are taking the risks, the uncovered risks in between, right? That indeed, as you have been saying, the complexity is increasing, and therefore, especially on the downstream side, there are players that do not want to take 100%100 \%100% of the risks anymore. I really think that the time of plain vanilla payers produced, or players forecast. The PPA is maybe not completely over, but it is slowing down, because the ones that have been buying those those PPAs on the downstream side, are realizing that there are quite some risks that they’re taking in the books. And I think it’s now time to to adjust again, the upstream with the downstream, and basically structure the in between which the markets, or let’s say, the perception before we’re saying was not needed. And I think it it is very much needed. It that we are, that we are looking at as a portfolio approach. And you might be asking, how do you actually take this risk? We don’t. I mean, we, we do, but we are structuring it in a way that we will be able to to hedge it again in the market, or we are seeing it ourselves as a portfolio. I mean, we are building assets. We have an upstream portfolio. We have our external upstream portfolio as well, where we are buying the green electricity. We have our B to B and B to C portfolio that is having hourly shapes as well. And in between, we are looking at how actually the flexibilities fit in in order to hedge our positions. So what we are not doing is just buying green electricity and selling base load green to our customers, but we are looking at it from an portfolio approach in order to see how actually the different positions are securing itself or are hedging itself? Yeah, yeah. Just my sentiment that I guess it is a matter of time that this, this complexity has risen, and basically it plays to the strengths of utility and trading houses. Just before leaving, I want to pick your brain on one more thing. It’s just, do you see a role of CNI in battery of takes, or as a as a third party?

Luca Pedretti: Good question. When you are talking about CI You mean the tech companies, yeah. Or also, like in the in the old corporate world, sorry, in the PPA world, it was all driven by CNI, like all those deals. Of course, you had utilities doing balancing and so forth and supporting the deals. But would you see basically an off take market from the CNI space in anything battery or flexibility. I don’t know how to, how to, how to phrase that. I think there’s, there’s definitely, there’s definitely your markets on, on data centers, whenever you’re talking about, you know, whenever you’re talking about data center, let’s phrase it. Let’s phrase it a bit different. You’re you’re having an industry that is looking for grid connections and energization, right? I mean, this is what they need. They need to have energy and they need to have grid connection both. Is very tough to get in a lot of markets currently. So that, by definition, they’re looking for behind the meter flexibility as well as electricity, and therefore they’re even more like getting into the game of investments, so investing into assets. But I do think that in the end, they will need somebody that is managing it for them. So as a sole off taker alone, I’m currently doing I don’t see it as such. Yet, cool Katrin could have gone on for a long time. Thanks a lot for sharing your insights and overview. Thanks for coming to the show.

Katrin Fuhrmann: Thank you, Luca, it was a pleasure.

Here are some key takeaways from our conversation:

🔹 Colocation Basics: Colocation involves combining wind and/or solar assets with a battery energy storage system (BESS) at one grid access point. This approach offers significant advantages, including cost savings and improved market access.

🔹 Market Challenges: Standalone solar projects are facing increasing difficulties in finding routes to market due to cannibalization risks. Combining solar with BESS can help mitigate these risks and create an enhanced profile that is more attractive to buyers.

🔹 Enhanced Profile: By shifting solar energy from noon to evening hours using BESS, the value of the energy profile can be significantly increased. For example, in the German market, this can lift the captured rate from around 60% to above 90%.

🔹 Contractual Structures: There are different approaches to selling co-located projects. One common method is to sell the PV and battery storage separately, but selling them as a combination to one off-taker who can manage both the flexibility and renewable profile is becoming more popular.

🔹 Market Overview: The market for co-located projects is still in its early stages but is growing rapidly. The Netherlands and Germany are leading the way due to their volatile day-ahead markets.

🔹 Revenue Streams: Hybrid offtake agreements typically focus on long-term contracts for day-ahead market flexibility, excluding ancillary service markets which are more short-term and uncertain.

🔹 Market Predictions: While standalone projects will continue to dominate, co-location projects are expected to become more common due to their cost advantages and the need to find routes to market for solar projects.

🔹 Repowering: There is a growing trend towards repowering existing projects by adding solar and BESS, particularly in the German market.

For the podcast:

For the full transcript:

Luca (00:01.675) Welcome to the second part of today’s show where I’m happy to have again with me a good friend from Pexapark, Jens Holstein. Jens Holstein has been with Pexapark for many years already. He’s now part of the Pexapark executive management and oversees all things transactions for storage and PPA. Jens, welcome back to the show.

Jens Hollstein (00:23.608) Thanks again, Luca, and happy to be on the show.

Luca (00:25.325) How are things going?

Jens Hollstein (00:30.442) Yeah, I think, you know, we used to come from the PPA transaction side. And I think for two years, we have been making the journey from PPAs to BESS, as well as the transaction team within Pexapark. And we have come quite a bit of the way, I would say. Already today, a third of our business is around BESS and with the tendency to be the growing part and potentially already in 2026, the majority of our revenue will come from BESS, so over 50%.

Luca (01:02.359) Fast transformation. I think we chose a topic in the middle between PPA and BESS. So we want to talk about the state of colocation. At Pexapark, we focused early on colocation and hybrid PPA and then standalone took over. So Jens, maybe just to start, tell us a bit: what is colocation? What is a hybrid PPA? Maybe with the basics first.

Jens Hollstein (01:32.364) Yeah, colocation, I think, is the combination of a wind and/or solar asset with a battery energy storage system. So if we combine these two technologies at one grid access point, I think people talk about a co-location project. And why are we talking about co-location projects? I think the biggest advantage of these projects is that you still find a route to market for these contracts. I think because solar and standalone technology is having difficulties finding routes to markets and you have clear cost advantages here as well.

Luca (02:16.577) What do you mean standalone solar faces difficulty finding route to market?

Jens Hollstein (02:23.808) In more and more countries, if you call around to corporate customers and ask, do you want to buy PV only? They will simply not even start a discussion about price because they are so afraid of the cannibalization risk that a standalone project will have difficulties finding its buyer.

Luca (02:44.909) So what are they buying if they buy from a co-located project if you combine solar with BESS? What are the corporates or utilities buying?

Jens Hollstein (02:57.58) I think there we maybe have to make a step back. How do you sell a co-located project into the market? And there we see different possibilities. On the one hand, the easiest one is if you sell those assets with separate contracts. And that’s what we still see as the standard in quite a few markets because the industry was designed around an asset-by-asset sales approach as well. So quite often we see that you sell the PV separate and the battery storage separate. Of course, this has its limitations. As we see, if the PV is standalone, it can’t find any more access to the market, it’s difficult to use this approach. Then I think this was also our first idea here at Pexapark. We sell it all to one. So we sell the combination of the battery storage and the PV asset to one off-taker who buys the flexibility and the renewable profile. And this has happened, but it’s a very limited number of buyers who can manage all these different things, who are experts in pricing renewable profiles and who can also optimize the battery from A to Z in all markets, starting from auxiliary services to the long-term flex value. So both of these, let’s say easy routes to markets have their limitations.

What we start to see is that you take apart a bit of the battery flexibility value and you allocate the day-ahead market value to the renewable asset and sell an enhanced profile to the customer. Whereas you still optimize the battery intraday and in the ancillary service market and capture this value with a battery optimizer. By doing this, you can find more buyers because there is a bunch of optimizers available in the European market space and an enhanced profile you can sell as well to corporates and utility buyers. You still have a lot of buyers for these enhanced profiles as well.

Luca (05:16.301) Can you explain in more detail what an enhanced profile looks like?

Jens Hollstein (05:22.796) An enhanced profile means that you, for example, take one cycle of the battery to shift the PV profile away from the, let’s say, bad hours around noon to the evening hours. And by doing so, you can increase the value of the profile quite a bit. For example, I think in the German market, you can lift up the quality of the profile from, say, captured rate. Solar is maybe at around 60% as we speak in the German market. And just with one cycle, a three-hour battery, you get up above 90. So in the area of an offshore wind profile.

Luca (06:06.061) Cool. How is this done contractually? I assume there is a value in this shifting of hours from noon to the early evening. How is this contractually remunerated?

Jens Hollstein (06:20.396) In the end, an increased value of the PPA price, that’s the main remuneration of this shift because you sell it as a pay-as-nominated or financial structure to the customer.

Luca (06:33.485) Cool. Let me ask all those detailed questions as we get so many questions on how does a co-located hybrid offtake look like. Right now, it might be very feasible to shift from noon to early dinner time, but this could change. You deploy four or five gigawatts of new batteries and then maybe the value looks different. How is this handled practically in contracts?

Jens Hollstein (07:02.662) We see different things. On the one hand, what you can do is if you do it financially, you can just give the three best and the three lowest hours because you don’t need to nominate anything on a day-ahead basis. You actually can give the best three hours of each day. That is easy as well, future-proof. If you need to do it physically, you can give the rights to shift these things. But as we speak, it’s quite stable. And I think it will be quite stable maybe for a few years. It’s actually very constant, hours from 12 to 2 and you should give it back from 6 to 8.

Luca (07:44.494) Understood. But the renewable developers or the IPPs investing in the assets, they do need a certain premium that this works, that you have an added investment, that you enable the enhanced profile. Can you give an overview of which markets this could work on, let’s say, a free market basis without subsidies?

Jens Hollstein (08:08.91) I think if you look at the European landscape, you can look at the markets where you have the biggest spreads in the day-ahead market between these two highs or two lowest hours. And there is, I think, the Netherlands and Germany leading the crowd as the most volatile markets where there is a lot of value in the battery. Markets like Spain, for example, with less volatility are not as advanced on this co-location journey. So I think it’s really looking at the volatility of the day-ahead market gives a good indication for a good BESS market. And then of course, there are subsidy schemes, auxiliary service market setups, which makes the picture a bit more complex.

Luca (08:55.437) Yeah, you pointed out a good topic, the ancillary service market. So storage is the Swiss army knife of the energy transition. And in co-location, we just talked about the arbitrage of noon to early dinner time. So what about the other potential revenue streams? Are they excluded? Are they included in hybrid offtakes?

Jens Hollstein (09:22.134) I mean, in hybrid offtakes, normally they don’t include them because you want to get to a longer-term contract. And these auxiliary service markets are more short-term markets and it’s very uncertain how they will develop. We saw, for example, the UK market where we had a lot of value in the auxiliary service market in the first years, and it’s quickly got cannibalized as well. That’s why you potentially want to have a more short-term contract on these optimization agreements, whereas you want to sell the day-ahead market flexibility on a long-term basis to secure long-term revenues for financing these assets. And that’s why we thought this split might be an ideal combination.

Luca (10:06.445) This actually just to sum up consists of three parts. You have basically a pay-as-nominated solar profile, which includes an uplift for the shifting of one, two, or three hours. Then in another part, you would have a short-term agreement to monetize the other Swiss army knife functionalities of the storage unit.

Jens Hollstein (10:35.022) Correct. And this gives you, I think, the best of both worlds. You want to optimize your assets in these short-term markets and get the early mover advantage in these markets as well. And you want to be able to finance these assets and don’t give up too much of the upside in a long-term tolling agreement with the utility.

Luca (10:57.037) Understood. It took a bit on the PPA side that everyone understood what a pay-as-produced is, how it is implemented and done. Like the standardization never got very far, but I think the breakthrough was that everyone understood what the risks are. If you look at the state of the BESS offtake market, where are we right now in terms of people agreeing to this is the right structure to do?

Jens Hollstein (11:26.636) I think we are still in the early stages. I think still the market, the asset standalone is the standard and the structures we discussed in the last minutes are more an exception. And we see most of the assets are still contracted on a standalone basis because this is how the industry works. Banks have a model for a BESS asset and they have a model for a PV asset, but they struggle to have a model for a co-located asset. And what is true for the banks, it’s true for the investors. It’s true as well for the BESS optimizers who like to have standalone assets and they can do everything they want. But the co-location assets with restrictions is not their standard. And so we are at the early stages to understand that we might need to move away from pure standalone sales of these assets.

Luca (12:22.635) What do you believe is driving this move or potential move away from contracting the assets on a single basis?

Jens Hollstein (12:34.316) I think that some of the technologies like solar don’t have a standalone route to market. So if you want to sell it standalone, there needs to be a route to market for each of the single assets. And if you don’t have a route to market for solar anymore, then there is no co-location project.

Luca (12:52.813) So storage becomes the bigger sister of solar. They enable solar, more solar.

Jens Hollstein (13:00.77) Yes, in a way on a very project-by-project case, but also on a system basis. I think we see clear signals in quite a few markets that without the addition of BESS, we struggle to add more renewables.

Luca (13:16.717) Absolutely, clearly. If you look a bit at data, do you have some numbers on how big the market already is? How many deals have been done?

Jens Hollstein (13:29.857) Yeah, I think on the total market, I think we have now three gigawatts of co-located BESS capacity contracted in 2025, which is a strong increase compared to 2024. But we are clearly far behind the standalone BESS with, I think, 14 and a half gigawatt-hours. So you can still see that the standalone BESS is dominating the market, but the growth rate on co-location is even higher.

Luca (14:01.549) And where do you see what makes you most optimistic? Which markets would you say are far ahead of the crowd in terms of colocation?

Jens Hollstein (14:13.292) I don’t think it’s easy to give a clear answer that there is one market clearly ahead because you have different drivers in each of the markets. There is a lot of potential in the German market, but we lack the grid access at the moment, which is basically true for co-location and for standalone assets. But standalone assets are quite often connected to the TSO level where it’s a bit easier than on the DSO level. But we see also co-location in Eastern Europe starting as a new route to market. So it’s not a clear market leading this.

Luca (14:52.927) If you could expand your market overview, you mentioned a bit about Spain and GB. If you could drop a bit of your assessment of those markets.

Jens Hollstein (15:04.36) In the GB, we still see a lot of co-location projects and we have a separate route to market because the cannibalization is not as high as on the continent, maybe as well due to the installation of BESS already. And we have a route to market on the auction side as well for the BESS site, for the PV site. That’s why we see here more the separate, so one agreement for BESS and one agreement for PV as the standard route to market in the UK market.

In Spain, I think we are not yet in the investment side. We see a lot of talking. We know that there is a new subsidy scheme coming, which will push BESS on the Spanish market as it is highly needed here as well. But what will be the contractual route to market? I think it’s not yet decided. But we don’t have the same value in the merchant market standalone as we don’t see the same intraday spreads as in other markets in Europe.

Luca (16:07.522) And next to subsidy, the design of the actual markets, will there be a capacity market or not, will play a crucial role.

Jens Hollstein (16:16.524) Yeah, I mean, you see it, the big wave in Italy is clearly driven by the current Maxa auction. Let’s see what the outcome will be. I think as we record, there is the due date today. And yeah, we helped some projects to bid into this and we are really curious to see the outcome of this capacity auction or this auction market in Italy.

Luca (16:40.501) As our listeners and generally we humans love predictions, let’s venture into predictions. I would just like to get your best estimate on how hybrid PPAs could evolve versus standalone in a general state over the next two, three years.

Jens Hollstein (17:03.182) I still think that we will see a dominance of standalone, but we will transition because the benefits of co-location are simply on the cost side, that you save quite some cost if you have the same transformation station and the same grid access point. And this will be a clear benefit to a co-location project. So maybe you know, we will need them both and we will see them both in the next two to three years.

Luca (17:36.173) I saw some staggering stats just like that. Apparently, two-thirds of all new solar projects in the pipeline in Great Britain are co-located.

Jens Hollstein (17:50.86) And I would estimate that you would find similar figures for quite some markets, I think also in the German market. All solar developers have become BESS developers as well, just to find a route to market. And there is a natural combination of PV and BESS. You have the lowest costs as well associated with this, whereas with combination with wind, you lose maybe 5 to 10% of the revenues with solar. It’s only three to five. So also, it’s a technology that is best suited for BESS.

Luca (18:28.845) Can you explain again? That’s actually something which I find very interesting. You mentioned solar and BESS being like the natural pair. What about the state of hybrid wind and BESS units?

Jens Hollstein (18:46.67) You have simply a very daily cycle on the solar side, sun at day and no sun at night. This is a good combination as well with the ability of storage energy for a few hours and a BESS storage. Thereby, have less hours as well where you have full production on the solar side. It’s depending on the site in Europe, maybe between 1,000 and 2,000 full-load hours. Whereas on the wind side, you have clearly more full-load hours on the original asset. So if you share the same grid connection, you have less friction between the BESS system and the PV system and the clear advantage. Whereas with the wind side, of course, you have more friction. If you get to offshore wind with four and a half thousand hours where you need the full grid connection already, of course, there is less potential for the battery to play.

Luca (19:44.462) Makes sense. Actually, we always when we talk right now about co-location, a new hybrid offtake agreement. Is there also like a repowering for co-location where BESS units are added to existing projects? Have you heard of that? Is this a thing?

Jens Hollstein (20:06.712) I think we see now the first big repowering wave in the German market. I think it’s one of the oldest markets and there are more and more wind units actually falling out of the feed-in tariff system. And there is an active market for a few years where you can buy these projects. And when you then go for the repowering, quite often you try to hybridize them, so adding solar and nowadays also BESS to these sites. And you can do so as there is, let’s say, a lot of money in these repowering projects. Quite a few of these projects don’t need even additional equity as the old value of the old project is enough to finance these new assets.

Luca (21:03.169) Well, Jens, thanks for this overview. It just proves that we can even do a podcast on the most arcane topics of the energy transition. I’m very excited to see how this will develop. Yeah, I haven’t fully formed my opinion on how big hybrid PPAs will be, but I think as you pointed out the stats, most of the projects somehow now in the pipeline come with co-located assets.

Jens Hollstein (21:32.78) Yeah, I think we will see more co-location projects, but I think we will see also for the next one or two years a dominance of standalone.

Luca (21:41.655) Cool. Thanks, Jens, for this overview. Thanks for coming to the show.

Jens Hollstein (21:48.558) Thanks as well, Luca.