Nordic PPAs – Effects on renewable growth and implications for electricity markets
PPAs are not a new phenomenon but have come to take on a new shape in the Nordic markets, tied to new renewable power installations, as government support schemes have been phased out. This paper identifies a logic behind entering into long-term renewable PPAs for both buyers and sellers, as well as for investors. This is, to a high degree, because Nordic power prices are so low, but it is also because of the worth assigned to green values by corporates. Furthermore, minimizing the volatility risk in an increasingly volatile spot market makes sense, particularly when low power prices can be secured for the long term. A main conclusion from this paper is that PPA-fuelled renewable growth is having a significant impact on both long-term system stability and short-term market developments. The oversupply generated by the booming renewable growth has pushed prices down to levels where producers of plannable power struggle. The resulting rise in system volatility should be a clear market signal to actors, however, as the actors involved in PPAs have shielded themselves from the volatility, it could be argued that they have also, to a large degree, shielded themselves from the market signal.