PPA, Procurement & Additionality in renewable-dominated power systems
Europe's renewable transition has been a success. The long-term PPA, the instrument that funded a good part of it, is no longer the hedge it used to be. Here is what is changing and how PPA fit in
Renewables won. The energy transition, at least by the metric of installed capacity and annual generation, has been a resounding success. Wind and solar are now the largest source of new electricity in Europe and worldwide Corporate Power Purchase Agreements (PPA) played a central role in getting us here: 90 GW of long-term PPAs have been signed across Europe since 2018, providing developers with the revenue certainty to build, and giving buyers a tool that ticked every box. Additionality: ✓. Sustainability credentials: ✓. A long-term price hedge: ✓.
But the world that made the long-term PPA look like an elegant all-in-one solution no longer exists. The very success of the energy transition has triggered a set of structural market changes that are quietly dismantling the economics of the product. In 2026, a stand-alone solar PPA in markets that are already dominated by renewables is not what it once was. The hedge is, in many respects, broken.
This article sets out the forces behind that breakdown, the data that quantifies their impact, and, most importantly and excitingly how the market is evolving, how PPAs are changing, what the role of Flexibility Purchase Agreements (FPA) play and what (huge) opportunities are being created by this structural change. It is always fascinating to see how price signals lead players and market to adopt. The playbook though first needs to change, and so does maybe a bit the debate around hourly matching.
Part I: Four Cracks in the Foundation
The challenges facing PPA markets in 2026 are structural and the direct consequence of renewable generation now making up a dominant share of European electricity supply in many markets. Understanding each one is a prerequisite for navigating them.
Crack #1 Negative prices have gone from rare to routine
In 2017, day-ahead negative electricity prices occurred 834 times across European markets. By 2025, that figure had risen to 9,253 occurrences — an eleven-fold increase in eight years, according to Pexapark’s Renewables Market Outlook 2026. Our estimate is that negative prices will remain a persistent feature of the market for some years to come. The flexibility gap is simply too large.
This matters for PPA economics in two interconnected ways. First, when market prices are negative and a generator is selling on a pay-as-produced basis, the PPA seller either pays the buyer (if contract terms pass through negative prices) or the generator eats the loss. The allocation of negative price hours can swing the effective PPA prices by several euros per megawatt hour. Second, even where contract structures avoid direct negative-price exposure, the volume-weighted capture rate, that is the average price the asset actually realises relative to baseload, falls sharply whenever negative-price periods coincide with peak generation hours, which for solar is almost by definition. In practice the risk is often shared between Seller and Buyer. Buyers are by nature less affected by the risk as their budget security is risked by high prices against such arrangement still protects while negative prices itself would help lower procurement costs in those given hours. From a seller perspective though the result is that capture rates are falling and PPA pricing is increasingly uncertain.
Crack #2 Solar capture rates are decoupling from baseload
The average rolling 12-month solar capture factor in key European markets has declined sharply since 2023. Where solar assets once achieved capture rates of 85–90% relative to baseload prices, Pexapark’s data shows rates now averaging closer to 55% in Germany. And this development occurs in market after market as the success of renewable technology applied irrespective of geography just with different time lags.
This has a direct and under-appreciated consequence for anyone holding or considering a long-term pay-as-produced PPA: the hedge is becoming less effective over time. A fixed-price PPA against a baseload cost driven procurement was supposed to protect you from base price movements. Demand profiles from industrials more often than not are linked to baseload. Now, if solar assets are increasingly generating during the lowest-value hours, and the discount between what it produces and what baseload delivers continues to widen, a solar PPA stops functioning as a price hedge and starts functioning as an exposure to the captured-vs-baseload spread.
The data most forecasters missed
Pexapark tracks capture rate assumptions not only from generation models but from what buyers actually price into PPA bids and offers. By aggregating this market consensus through regular polling, our curves reflected the accelerating erosion in Q3–Q4 2024, roughly six months before it appeared in the consensus of third-party energy forecasts. The consequences of that lag included valuation write-downs and real commercial distress for parties that had priced risk using stale forward assumptions.
To illustrate the magnitude of this: on a Spanish 10-year PPA with a start date of January 2027, the spread between an annual baseload PPA and a pay-as-produced PPA stood at roughly 18 EUR/MWh in June 2024. By September 2025 it had widened to 26 EUR/MWh. The baseload contract had drifted up slightly (48.70 → 53.95 EUR/MWh); the pay-as-produced price had moved in the opposite direction (30.48 → 27.97 EUR/MWh).
Crack #3 Firming costs are rising as intermittency value surges
One of the most significant development in the procurement world and with much wider impact than the rise of PPAs from the point of view of a corporate buyer has been the disappearance of so-called Full Supply contracts. Full Supply, a “pay-as-produced” arrangement that allowed companies to secure all their power needs at a fixed discount or premium to baseload prices, provided a straightforward, all-in solution covering all consumption hours in a single contract. This product is no longer offered across most markets. And this product is no longer available also because of the success of renewables which are driving higher day ahead and intra-day price volatility and made its provision too risky or costly for utilities and traders.
As a result, all corporates without tariff protection must now engage in structured procurement. In practice, this means working with utilities to build procurement using standard contracts, while individual hours remain exposed. Even in the most liquid power markets like Germany corporates are not able to secure their off-peak exposure. Price volatility has therefore become a defining risk for corporate buyers, and elevated volatility directly increases overall procurement costs. Everyone is now living with greater fat-tail risk. While in the renewable space we currently are all fixated on the growth of storage which is driven by high spreads between low and high priced hours, for corporates this represents pretty much simply one thing: higher costs for procurement.
It is a point that I have not yet come across in the debate about hourly matching. Firming costs are higher because of renewables. Risk increased because of renewables. A hybrid PPA from a co-located wind/solar + storage asset is a higher costs arrangement to secure something what used to be simple and straightforward. I am saying this as a life long advocate of renewables and having helped to built a company on the back of the PPA, and now storage boom. The better we understand the needs of corporate buyers, the better we are able to find solutions that work and can scale.
A hard truth is as well that in the wake of the energy crisis, many corporates have entered in long-term (mostly solar) PPAs that are now way out of the money and causing real economic harm. Because of low hourly match, because of much faster erosion of capture rates than expected in the last few years, and often also because of lack of thorough advisory scrutiny from “no cure, no pay” arrangements, PPAs for many mid-market corporate buyers have incurred lasting reputational damage.
Part II: Impact on Hedge Effectiveness & Addionality
Stack these forces together and the conclusion is uncomfortable but unavoidable. Stand-alone, long-term solar PPA in highly renewable-dominated markets have two defining characteristics when assessed against its original purpose for corporate procurement:
By hedge effectiveness we mean the degree to which the PPA price moves in line with your actual energy cost exposure. When capture rates were 85-90% a solar pay-as-produced PPA closely tracked your underlying cost on an annual basis. You could hedge baseline price risk. At 55% capture, the correlation breaks down and you are hedging a different price than you are exposed to. You might be increasing risk.
The green add-on value situation is equally challenging. Low economic value as well indicates low incremental environmental value. If we have negative prices during mid days and spiking curtailments already, of course, the incremental environmental value of adding more of the same is getting ever lower.
The instrument remains totally functional and is still deployed in GW, even in markets with very high solar penetration. It simply no longer performs the economic function for which it was procured. This is not a definitive trend but the concept of hedge effectiveness is very important to understand. Capture rates will stabilize and eventually rise thanks to demand growth or the reduction of the flexibility gap. Also, it can be offset by decreasing cost for the technology itself but, even after decades of proving otherwise, this is not given.
The PPA transaction market is reflecting this. In Germany, demand for stand-alone solar PPA has reached saturation. Transaction price ranges have narrowed sharply. Perhaps most telling: Pexapark’s Fair Value model which aggregates market-observed capture rate assumptions, bid/ask data, and forward curve signals into a single reference price, is now running below observable transaction prices in the most important European markets. Sellers are asking more than the market fundamentally supports. Buyers without access to price intelligence are overpaying.
Pexapark’s Fair Value is now below observable transaction prices for stand-alone solar PPA in most markets. Buyers without price intelligence are overpaying.
Part III: Procurement in renewable dominated power systems
None of this means corporate renewable procurement is broken. The market and players are adapting. But succeeding requires a fundamentally different approach across three dimensions.
1. The Foundations remain the same: Evergreen risk management
The first and most fundamental change is treating power procurement with the same discipline applied to any other financial risk. That means two things: regular price fixing to achieve an average-cost effect over time, and staggering contract maturities along the liquidity horizon to avoid concentration risk.
German Power Baseload Year 2027, for example, traded in a range of roughly 75–100 EUR/MWh between January 2025 and January 2026. A procurement team that fixed exposure at regular quarterly intervals would have achieved a portfolio average meaningfully better than any single-point decision during that period. The principle is simple but execution requires both discipline and hard work. Everyone has an opinion on price but evidence shows that no one can really time buy decisions correctly. Hence it is important to have a robust process in place to execute upon such a simple averaging strategy.
The same applies to staggering of contract maturities to avoid concentration risk. In essence, while most corporate buyers want to be hedged 100% on the front year, exposure further out might be rationally hedged at lower levels. This depends on the relative share of electricity in your overall costs of goods sold, the ability to pass through power costs, competition intensity as well as plain old bid/ask spreads. On the later, exchange data shows that bid/ask spreads for near-term baseload forwards (Cal27, Cal28) sit at 0.2–0.4 EUR/MWh, relatively tight and liquid. A 10-year PPA in Germany, by contrast, carries a spread of 4.5 EUR/MWh based on Pexapark market data. Knowing where you sit on the liquidity curve hence helps to manage concentration risk. This is also the realm where rationally, without considering sustainability matters, a long term PPA would fall in. If you have determined that you want to hedge i.e. 20% of your long-term exposure to power, then a PPA become a viable procurement option from a risk management point of view.
Practice has show that regardless of market environment, whether you are operating in low volatility, low renewables markets or today’s high volatility, high renewables markets, that applying those evergreen risks management techniques will save the day and provide for security in supply and avoid costly errors.
The asymmetry of knowledge in illiquid markets
In the most liquid baseload forward markets, all participants have roughly equivalent access to price discovery. In long-tenor PPA markets, the information asymmetry between sophisticated utility sellers and corporate buyers is substantial. The bid/ask spread on a 10-year PPA is more than 20x the spread on a year-ahead baseload contract. Pexapark’s transaction price range and Fair Value data is specifically designed to close that gap, giving buyers the same reference framework that sellers use internally to assess their own offers.
2. Stop buying megawatts, start matching hours
The second shift is more conceptual but equally consequential. The frame of reference for renewable procurement needs to incorporate both volume (how many MW or MWh do I procure?) as well as temporal matching (how much of my consumption is covered by generation in the same hour?).
When economically the highest risk are unmatched hours due to high price volatility and many standard PPA have become less attractive both economically and environmentally, procurement needs to look now as well at temporal matching. This being proxy for the question of “is my hedge effective?”.
And if you also need to factor in environmental considerations, you want to know how you match on hours produced clean. This is what the Carbon Free Energy (CFE) score measures.
This will influence the hierarchy of what is valuable. A wind PPA in a zone with high hourly match to your consumption profile may be worth more than a on face value lower cost solar PPA that generates mostly during the hours when your load is lowest. A short-term green delivery profile synthesized from the portfolios of a large next-generation IPP or local utility may deliver better hourly matching than a 10-year PPA from a new-build solar asset. And finally, the purchase of a Flexibility Purchase Agreements (FPAs) where products such as a TBs (Top-Bottom Spreads – the daily difference between the most expensive and cheapest hours) would allow to reduce hourly risk could suddenly make a lot of sense in a world where corporate buyers are not able anymore to procure full supply and fear being exposed to very spikey spot prices.
At a recent corporate only conference I noted near-universal scepticism toward hourly energy matching. The prevailing view is that it adds even more complexity and cost without delivering proportionate value. The expected consequences are reduced PPA uptake and a quiet downward revision of corporate renewable energy targets. Hourly matching is widely perceived as a seller’s led solution in search of corporate demand, rather than a response to it.
Whatever the scepticism might be against hourly matching, a strong rationale can be made around the argument of “hedge effectiveness”: In renewable dominated power markets with high price volatility, you now simply must strive to achieve high hourly matching between your procurement contracts and consumption load. And in such renewable dominated power system, whether you like it or not, there is hardly any way around to not contracting with renewables and storage in the near future. Contracts with a higher hourly match provide better economic value that those with lower match.
Equally we will be contracting increasingly from operating assets at shorter duration which vibes much better with the natural way of how commodity markets work. New investment is driven and realized in cycle to cover replacements and serve incremental new demand. At some point the new energy system of 80-90% renewables, high interconnection, high storage penetration and cross-sector activation (retail, houses, demand side) and some gas back up will have been built. So the market will shift to contracting from operational assets.
Given such market-development trajectory, increasing the CFE score above a given country baseline should be the new additionality. You should not anymore need to be contacting long-term PPAs exclusively from a new built asset to fulfil additionality criteria but you simply want to on increasing your CFE score above i.e. your country baseline or more aggressive targets being either set voluntarily or by more firm political requirements (it is easy to have a high CFE score in Switzerland or Sweden, much harder to achieve in Poland or Italy)
The overarching constraints on the corporate side right now though remains simply: too much complexity. And yes, procuring under a CFE framework will add even more complexity. This complexity will need to be mitigated through advisors that run digital services and platforms as it is today. The problem is an old one: in many markets it still excruciatingly difficult to have access to your meter data. Tracking hourly otherwise is not big feat. Power procurement, even with help of an advisor, is and will remain a complex affair compared to all the others task faced otherwise by the buyer. Add to that very high density of regulatory intervention and country-by-country fragmentation, all of which compound the challenge for corporates operating across multiple jurisdictions. There are though very good reasons to do so.
Part IV: Conclusions
The rise of renewable & storage is one of the great industrial achievements of the past two decades. Corporate buyers were instrumental in funding it, and the long-term PPA was their primary instrument. But the market context that made that instrument so successful no longer exists.
Negative prices are structural. Capture rate erosion has outpaced the models that were used to price the contracts now sitting on corporate books. Firming costs are currently still rising as weather-driven price volatility replaces fuel-driven price formation and the flexibility gap is so large.
Procurement in the age of renewable dominated power systems will adapt. In their very own self-interest, I believe corporate buyers could be equally instrumental in driving the next phase of market development if they were to adopt a CFE centric procurement approach. It will accelerate the shift of value to better matching PPAs or reducing hourly risks through FPAs. The market will in tendency become of much shorter term nature, focused on finding solutions to extreme price risks around those few non hedged hours. FPAs hold the promise to lower or even remove those hourly risks. This will happen with or without a CFE framework in place but having one will accelerate it, provide stability to the development of the FPA market (storage also faces cannibalization…) and last but not least, you simply want to be doing something that is both rationally good for economics and the environment.
For players active on the sell side, the biggest opportunity might be around the synthetization of composite clean energy deliveries. Imagine next-gen IPPs and utilities, leveraging their ever larger portfolios of own and 3rd party generation assets, technology and trading capabilities to produce PPAs with high CFE-matching qualities or FPAs that reduces single hour risks. The intermediate step emerging might be shaped PPAs that allow regular updates of the delivery profile. It is always remarkable to see how the market and players are adapating!
Corporate buyers might thank them with massive demand as we currently are missing a procurement solution that replaces the old Full Supply & PPA combo.
The next wave of corporate demand will need a meaningfully different product than what we used to have. Let the future be green deliveries plus FPAs. The green deliveries may be synthesized, shaped or otherwise structured as long as it supports the needs of industrial load or corporate procurement needs.
And the PPA market will further mature. What gets forgotten sometimes is that the short-term PPA market is a FACTOR larger then the long-term PPA market. Utility are stagging a comeback as offtaker thanks to their abiltiy to structure PPAs around their portfolios and storage. Data Centers already provide for +30% of all long-term corporate demand and growth is at 20% per annum, forming a constent need for additional large scale renewable investment. And, according to McKinsey, demand growth is back in Europe at around 2% per annum. While far away from US realities, it is adding up!
In a way, the debate about hourly matching also shows a little how littel understanding there is between asset investors and corporate buyers on some very fundamental aspects of each other businesses. The renewable industry in its drive for scale has been myopic and focused on a product that mostly serve its interest: long-term PPA to enable debt and higher leverage. As shown in this article, the context has changed and the data proves it.
Hence it is not enough to only cheer for new CFE rules but we need to also show a path that actually serves corporate procurements needs and acknowledge the risk and costs faced by those buyers.
And last but not least, “PPAs” is so much more than what we used to think of it! Ultimately, like the upcoming FPA, these are ever evoling tools for something very basic and evergreen: proper energy risk management.
Where I’m Bullish, What I’m Watching & the Hourly Debate
What am I bullish on?
Any “high-capture PPA” (wind, hybrid)
Shaped PPA of any duration esp if they come with the possiblity for regular (i.e. weekly) delivery updates
Shorter-duration PPAs from operational assets, in general. A HUGE market
Platforms and solutions that enable procurement of smaller PPA tranches
Long-term PPAs for the rapidly growing tech sector (+15.8 GW by 2030 from hyperscalers alone) and rational demand, i.e. those 10–20% tranches of an overall hedging need
Corporates buying FPAs such as TBx to (a) correct solar overexposure and (b) as part of systematic procurement strategies
Next-gen IPPs and utilities synthesizing various clean sources of production and storage to deliver firmer, customer load-centric profiles including hydro, nuclear, and gas where needed. Ultimately, we are striving to maximise the highest economically feasible CFE score
Solar, of course! Because of its versatility in combination with storage, and its track record of continuous cost improvement
Where do I see the biggest uncertainty?
Negative prices and capture rates are not static: they depend on overall system composition. The market is already adjusting, and players are reacting to price signals in real time. Germany is currently adding 1 GW of BESS per month. The key question is how quickly this will compress TBx spreads and improve capture rates.
What data do I want at my fingertips?
Market-based intelligence for renewables and storage remains far from mainstream outside of large IPPs, traders and utilities. This is an anomaly of this sector versus compared to commodity markets. To buy and sell effectively, I would not want to be without an independent view on fair value and transaction price ranges. Be it for curves, FPAs, and PPAs alike. Forecast are not enough. Same for historic performance. You want to know the market consensus and the risk implied from these price assessments. This is why I am so proud on the work we do at Pexapark. We deliver these on daily basis and to the same rigorous reporting standards as applied by the established price reporters in other commodity markets.
My take on the hourly debate
Transparency on clean hourly matching is sufficient. Keep locational criteria wide and flexible. Above all, don’t add more complexity and burden than that. Renewables procurement is already complex enough.
To the renewable side: you currently address perhaps 10–20% of what an average mid-market corporate actually needs. Hourly targets will not solve your problems.
To the corporate side: power procurement is complex and will remain so. The new additionality is raising your CFE score above your country baseline; not matching consumption with GoOs or PPAs on an annual basis, which no longer provides an effective power price hedge either. Procuring with a CFE mindset will generate both economic and environmental value.