Long term renewable power purchase agreements with renewable energy generators

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May 2022 – The sale of the generated electricity by renewable energy generators through market-based long-term power purchase agreements (PPAs) is a fairly new phenomenon in the Hungarian electricity market. Whilst PPAs have already been concluded between conventional power plants and off-takers in the past, the interest towards renewable PPAs has only started to increase recently, primarily for the following reasons:

Firstly, over the last few years the economics of renewable energy generation has substantially improved, and renewable energy generation has become more and more competitive with conventional forms of power generation.

Secondly, the governments started to gradually phase out many of the formerly existing “old school” renewable subsidy schemes, including the KÁT subsidy scheme in Hungary. Thirdly, the dramatic increase and the volatility of the wholesale electricity prices increased the demand for longer time fixed price electricity sourcing arrangements. Lastly, investing in the green economy, including renewable energy generation, has become a number one agenda item for large energy companies and also for institutional investors.

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