Wilmington, Delaware, United States, Transparency Market Research Inc. -, Oct. 15, 2024 (GLOBE NEWSWIRE) -- According to a report published by Transparency Market Research, the global power purchase agreement (PPA) market (전력구매계약(PPA) 시장) was worth US$ 20.1 Bn in 2022 and is expected to reach US$ 399.2 Bn by 2031, at a CAGR of 39.3 % between 2023 and 2031.
The Power Purchase Agreement (PPA) market refers to the structured financial agreements in which energy buyers, typically large corporations, utilities, or governments, agree to purchase electricity from a power producer at a predetermined rate over a long-term contract, typically ranging from 10 to 25 years. PPAs are widely used in the renewable energy sector, particularly for solar and wind energy projects, as they provide a stable revenue stream for energy producers while ensuring fixed energy costs for buyers.
PPAs can be categorized into two types: on-site PPAs, where the energy is generated and consumed at the same location, and off-site PPAs, where the power generated at a remote location is delivered to the buyer through the grid. These agreements play a crucial role in facilitating the development of renewable energy projects by reducing risks for investors and enabling power producers to secure financing with ease. In the context of the transition to clean energy, PPAs are gaining an increasing importance as they help organizations meet sustainability goals, reduce carbon footprints, and lock in energy prices to avoid market volatility.
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Power Purchase Agreement (PPA) Market Overview
Power Purchase Agreements (PPAs) offer significant benefits that are driving their rapid adoption across industries, particularly in the renewable energy sector. A PPA provides long-term price stability for energy buyers, protecting them from the volatility of energy markets while ensuring a steady revenue stream for energy producers. For corporations, utilities, and governments, PPAs are an effective way to meet sustainability goals by securing renewable energy sources such as wind and solar, without the need for upfront capital investment in power infrastructure. By enabling both the parties to lock in electricity rates for the duration of the contract, typically 10 to 25 years, PPAs mitigate financial risks and contribute to cost predictability in energy planning.
The global shift toward renewable energy, driven by climate change concerns and carbon reduction targets, is one of the major factors fueling the power purchase agreement (PPA) market expansion. Governments and corporations alike are increasingly committing to decarbonization, with many setting aggressive goals to reach net-zero emissions. This has accelerated the demand for PPAs, as they enable companies to procure clean energy directly from renewable projects and reduce their carbon footprint.
Additionally, corporate social responsibility (CSR) and Environmental, Social, and Governance (ESG) initiatives are pushing businesses to adopt sustainable energy practices, with PPAs being a preferred mechanism for sourcing renewable power.
Technological advancements in renewable energy, particularly in solar and wind power, are also driving market growth. The declining costs of renewable technologies, combined with improvements in grid integration and energy storage, have made PPAs more attractive and accessible. Moreover, supportive government policies and financial incentives, such as tax credits and subsidies for renewable energy projects, are encouraging the expansion of the PPA market. In regions like North America and Europe, regulatory frameworks that promote clean energy and encourage corporate renewable procurement have created a favorable environment for the growth of PPAs.
Furthermore, the rising demand for energy price stability amidst fluctuating fossil fuel prices has motivated many organizations to enter into long-term PPAs. As energy prices continue to be volatile, especially in the wake of geopolitical events and supply chain disruptions, PPAs offer a hedge against market uncertainty, ensuring fixed energy costs over the contract period. This financial predictability, coupled with the opportunity to enhance corporate sustainability credentials, is expected to continue driving the PPA market's growth.
Power Purchase Agreement Market Report Scope:
| Report Coverage | Details |
| Forecast Period | 2023-2031 |
| Base Year | 2017-2021 |
| Size in 2022 | US$ 20.1 Bn |
| Forecast (Value) in 2031 | US$ 399.2 Bn |
| Growth Rate (CAGR) | 39.3% |
| No. of Pages | 520 Pages |
| Segments covered | By Type, By Location, By Category, By Size, By Deal Type, By Application, By End-use. |
Power Purchase Agreement (PPA) Market Regional Insights
- Asia Pacific generated the largest market value in 2023. The region is also expected to maintain its dominance during the forecast period.
According to the power purchase agreement (PPA) market regional insights, Asia Pacific held the largest share in 2023. Increasing focus on renewable energy adoption, rising corporate demand for clean energy, supportive government policies and regulatory frameworks, technological advancements, and falling costs of renewable energy, and rising energy demand due to urbanization and industrial growth in emerging economies such as China, India, and Southeast Asian countries are some of the factors boosting power purchase agreement (PPA) market share in the region.
Prominent Players Operating in Power Purchase Agreement (PPA) Industry
General Electric, Siemens, Shell Pic, Statkraft, Fairdeal Greentech India, Renewable Energy Systems Ltd., Ameresco, RWE, Enel Global Trading S.p.A., The Climate Group, Sungevity, and Ecohz are some of the leading key players operating in the global industry.
Recent Developments
In January 2024, nextE announced that it had signed a corporate power purchase agreement for its 51.5 MW photovoltaic project to supply electricity onsite to one consumer, which it didn’t identify. It is the largest contract of its kind in Romania, the company claims.
Aiming to prevent the impact of price volatility on the electricity market, companies in Romania have started to turn to power purchase agreements (PPAs), which, in turn, attract investments in wind and solar power plants.
Switzerland-based Connect44 Group’s member company nextE said it earmarked EUR 35 million for the installation of a photovoltaic facility of 78.000 panels with a 110/20 kV substation in Romania. It will be built on the site of an unnamed consumer in the commercial and industrial (C&I) sector with which it signed a long-term corporate PPA, according to the announcement.
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Power Purchase Agreement (PPA) Market Segmentation
Type
- Physical Delivery PPA
- Virtual PPA
- Portfolio PPA
- Block Delivery PPA
- Others
Location
- On-site
- Off-site
Category
- Corporate
- Government
- Others
Size
- Up to 20 MW
- 20-50 MW
- 50-100 MW
- Above 100 MW
Application
- Solar
- Wind
- Geothermal
- Hydro
- Carbon Capture and Storage
- Others
End-use
- Residential
- Commercial
- Industrial
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