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Ireland has seen a clutch of corporate PPAs signed in recent weeks, underlining the offtake opportunities currently available in the country both for new projects which are able to successfully navigate Ireland’s planning labyrinth and mature schemes looking for price certainty as they near the end of their operating lives.
Greencoat Renewables’ signing of a 10-year PPA with Singaporean real estate investment fund Keppel DC REIT in mid-April for the output from its mature 48.3MW Ballybane Phase 1 wind farm in County Cork, for example, could be one of an increasing number of such “end-of-life” offtakes to be agreed in the Irish market over coming quarters.
With corporates’ desire to enter into renewables PPAs only increasing over time to both comply with CSR standards and to lock-in long-term price certainty, and a continued bottleneck in the permitting of new onshore wind and solar capacity in Ireland, the owners of older projects such as Ballybane could find themselves in strong demand from corporate offtakers for the foreseeable future.
The exact price at which Greencoat Renewables clinched a deal with Keppel is not known, although offtakes for older operating wind farms are currently being offered in the EUR 75/ MWh - EUR 85/MWh range, with inflation linkage, according to market sources.
These older projects are backed for the first 15 years of their operating life by the old REFIT contracts, but these support mechanisms will start to run out with increasing frequency through to 2030. As they approach this 15-year operating point, with most of their capex already repaid, they also have the flexibility to enter into short-term PPAs.
Old REFIT projects are also typically quite small, so they have a larger pool of potential offtakers to choose from than the typically much larger wind and solar projects now coming through the planning system or entering operation, giving them further negotiating leverage.
End of life wind projects’ market value is somewhat eroded by the fact that such schemes are not eligible to bid into Ireland’s RESS auctions, although they are attractive to power-hungry corporates as they are already operational and therefore often able to supply power immediately.
Greenfield projects across both solar PV and wind meanwhile continue to have the option of either negotiating a corporate PPA, or bidding into RESS auctions, with the tariff ceiling for the competition having risen sharply in recent quarters due to increased supply chain and financing costs.
Indeed, PPA prices for new projects are currently correlated closely to RESS prices, given that corporate offtakers need to make their terms attractive enough to entice developers away from the RESS auctions.
Ireland’s most recent RESS 3 competition in October 2023 resulted in average winning bids of EUR 100.47/ MWh, and this is around the price two prominent developers, one of solar PV and one of onshore wind, told NPM Europe this month they are currently negotiating long-term PPAs with corporate offtakers.
Amazon’s offtake deal with Bord na Móna announced for the 105 MW Derrinlough Wind Farm in County Offaly at the end of April - as the first part of a potential 800 MW partnership between the two in the country - is also mooted to have signed at similar levels.
In addition, corporates are understood to in many instances be offering PPAs at a slight premium to RESS, as they do not offer as many hedging mechanisms or developer-friendly conditions as the government-supported contracts.
One such feature, introduced in RESS 3 last year, is “Unrealised Available Energy Compensation (UAEC)”. This is intended “to de-risk developers from oversupply and curtailment related uncertainty, enabling support to be provided on the basis of a quantity closer to the energy available to be produced rather than energy actually produced,” according to a note on the measure prepared by law firm DLA Piper.
UAEC alone has a value of EUR 2/MWh - EUR 5/MWh to project sponsors, according to one investor contacted by NPM Europe.
Corporate demand for renewables PPAs is being driven by a likely new stipulation that new data centres planned in the country need to be net zero, while forward power prices are also now starting to go past the EUR 80/MWh mark, adding further urgency to efforts to enter into long-term PPAs.
“The expected consultation outcome [on the requirement for new data centres to be net zero], combined with their own decarbonisation targets, competition with government renewable support contracts, and a scarce pipeline of consented renewable projects has changed the dynamic in Ireland’s PPA market,” says Baringa senior manager for Irish power market generation David Gascon.
He adds: “It is no longer firmly a buyer’s market, where data centres would put out a tender for the amount of power they required and a range of developers would bid.”
The sheer scale of data centre activity in Ireland, and their need for renewables power, cannot be overstated. Of the estimated 1.8 GW of corporate renewables PPAs to have been signed in Ireland to date, around 1.4 GW-1.5 GW of these have been signed with the big tech companies, such as Amazon, Google and Microsoft, according to Baringa.
Data centres already built or under construction in the country account for 20% of Ireland’s energy demand today, and this will rise to 33% by 2030 not even taking into account new proposed data centres, the power consultancy says.
Amazon remains in the market for renewables PPAs in the country, according to industry sources, while EdgeConnex and Equinix, too, are widely understood to be on the prowl for offtakes. Corporate demand also stretches out to food & beverages, big pharma and transport, with Irish Rail for one also currently tendering for renewables power.
When this rising demand is stacked against how slowly new renewables projects are coming through the planning system in Ireland, renewables generators are set to remain in the driving seat in PPA discussions over coming quarters.
Ireland’s recently initiated RESS 4 competition - for which terms and conditions were published at the start of May, and for which provisional results are currently expected on September 9 - should provide some further insight as to how much new renewables capacity is clearing planning.
With RESS 3 widely reported to have been undersubscribed in 2023, with the auction set to deliver approximately 934 GWh in renewable electricity against a previous expected volume of 2,000 -3,500 GWh, and only 33 projects qualified to bid against 108 projects in RESS 1 and 130 projects in RESS 2, there is an expectation that RESS 4 too will ultimately result in a shortfall of eligible projects bidding also.
“We have seen nothing to suggest conditions for planning are any different from conditions around 12-15 months ago when RESS 3 took place,” one renewables investor active in the Irish market tells NPM Europe.
“There is an EU initiative to accelerate planning [across EU member states] but this won’t happen in time for RESS 4,” adds a commercial advisor.