The coronavirus crisis is likely to lead to a hiatus in new corporate PPA deals, according to industry participants who took part in a series of webinars organised by European law firm, Fieldfisher.
Discussions held last week to mark the launch of the firm’s report “Think GIG: The rise of Corporate PPAs” highlighted that both developers and corporates would be hesitant to commit to deals in the current circumstances.
Fieldfisher partner Lis Blunsdon, part of the firm’s Energy Regulatory team, said: “The drop in energy prices and uncertainty about near-term industrial energy demand has brought a very sudden halt to many corporate power purchase agreement (CPPA) negotiations.
“On the developer and financing side, there is reluctance to sign CPPAs while energy prices are at current levels, so most discussions have been postponed until there is a clearer view of when and to what extent industry will start up again.
“On the corporate side, companies are unwilling to commit to volumes until they know what they will require once economies begin to emerge from the shutdown.”
Nervousness about pricing in the face of a sudden drop in electricity demand triggered by widespread lockdowns has caused the freezing of the market, she added.
While the consensus view among webinar participants was that this was just a temporary blip and normal patterns will resume once the pandemic is over, “energy pricing is notoriously difficult to predict, and it is unclear whether and how quickly prices will rebound to pre-pandemic levels”, said Blunsdon.
But the law firm said the pandemic has given the still largely immature CPPA market a chance to pause and reflect on its direction of travel, and what emerges may be a more sophisticated sector than it was pre-crisis.