Power Purchase Agreements Emerge around the World

This blog is part of a series by Guidehouse Insights on power purchase agreements (PPAs); to learn more about the PPA market, check out the new Guidehouse Insights’ PPA Tracker.

Renewable energy costs have fallen in recent years, assisting the emergence of power purchase agreements (PPAs) that enable new revenue streams for energy asset owners and paths to decarbonization for offtakers. While most PPA growth has been in the US and Europe, global markets have seen nascent PPAs become major factors in clean energy procurement.

Asia Pacific

According to Guidehouse Insights, Asia Pacific represents the third-largest PPA market globally, with over 220 contracts signed and the highest growth rate of any region as of February 2023. Regulatory and supply barriers for renewable energy procurement in the region have previously left companies hesitant to commit to ambitious decarbonization goals; as of August 2021, corporations with RE100 goals comprised only 22% of regional PPA volume.

However, there are signs this hesitancy may be dissipating. For instance, in February 2023, leading nonalcoholic beverage companies Coca-Cola Beverage Co. (Guam) and Guam-based Foremost Foods, Inc. signed a 30-year PPA with a local Philippines energy producer that will underwrite an investment in a 117 kW solar PV system. Notably, at the conclusion of the term, system ownership will be transferred to Coca-Cola, which expects the solution to offset 12%-15% of its monthly consumption with renewable energy.

Latin America

PPAs are becoming a main driver of renewable energy expansion in Latin America, which has under 15 GW of procured capacity and difficulty finding PPA partners. Brazil is the top offtaker country in the region, while Chile’s natural resources and high wholesale market prices have also propelled the country to become a major market for corporate offtakers.

As an example, in November 2022 Brazil-based Scala Data Centers—looking to provide reliable clean energy for its data centers across Chile, Peru, and Columbia—signed a long-term PPA with Enel Américas for 1.6 GW, representing 10% of the energy company’s total existing capacity. Over a third of the power is reportedly going toward Scala’s new Tamboré hyperscale campus, one of the sixth largest globally.

Middle East & Africa

The Middle East & Africa’s shift from government subsidies for carbon-intensive fuels to cost-reflective tariffs and solar market growth has contributed to declines in prices for solar and wind deployments—explaining the 110 PPA contracts signed as of February 2023. The region has the highest tracked tenure of PPAs of any region, at an average length of 20 years. Potential aggregated PPAs have stalled in Saudi Arabia, however, due to a lack of credit ratings for large family-owned businesses.

In Africa, an emerging solar market signals broader PPA markets are likely on the horizon. South Africa leads the region in agreements, despite barriers imposed by strict regulations on power plant licensing. One notable example is SOLA Group’s two solar projects in North West Province totaling 256 MW, which represent the largest utility-scale PPAs in South Africa to date and are expected to become operational in 1Q 2024. The deployment—which has the potential to power 40,000 households—is an important step in demonstrating an appetite for increased energy reliability in a country that saw 92% of firms experience an outage in 2020.

Conclusion

The PPA market is expected to continue evolving as the cost of renewable energy technologies decline, renewable energy deployments become commonplace, and governments around the world facilitate regulatory regimes to support emerging agreements. With over 66 GW procured by companies in the Asia Pacific, Latin America, and Middle East & Africa regions alone, PPAs are providing a proven method for companies of all sizes to boost their use of renewable energy.

Interested in learning more about PPAs signed across the globe? Check out Guidehouse Insights’ latest Renewable Power Purchase Agreement Tracker as well as the other blogs in this series: “Power Purchase Agreements Primer” and “24/7 Clean PPAs Accelerate Green Hydrogen Production in Europe.”