According to eldiario.es, a Spanish online newspaper, the Spanish government has asked the European Investment Bank (EIB) to give financial guarantees for long-term fixed-price renewable energy supply contracts, known as Power Purchase Agreements (PPAs).
Spain, which has established itself as Europe's frontrunner in the PPAs market over the last two years, is attempting to promote this tool across Europe to help the economy decarbonize and assist the industry development.
As the ongoing gas crisis pushed up electricity prices, Spain’s major industrial firms are looking forward to EU’s approval of the financial instrument, while also asking for other urgent measures.
In Spain, the partially state-owned CESCE is currently providing financial support for PPAs in the local energy-intensive sector. Spain has suggested that the EIB provide financial support to strengthen bilateral green energy supply contracts at the European level. According to government sources, the government is also requesting that the EIB build EU-wide mechanisms to enable private banks to finance local renewable solutions.
The idea was first proposed at the European Council last December by Spanish Prime Minister Pedro Sánchez, who asked for “Europe to be able to respond to the growing volatility of energy costs” by decoupling electricity and gas prices. However, the idea has yet to gain support in the EU.
The EIB, which is owned and controlled by all EU member states and operates in 160 countries, is already the largest multilateral lender for climate action projects in the world. Last year, the EIB inked 111 projects for 12.771 billion euros in Spain, up 51% from 2020 and accounted for 13.5% of its operations in 2021.
The EIB is being used to channel these guarantees so that the EU's long-term finance institution may issue guarantees for these medium- and long-term fixed-price supply contracts.
Despite the energy crisis in 2021, Spain was the European PPA market leader. According to figures provided by the Swiss consultancy firm Pexapark, it accounted for more than 61% of total power contracted in Europe last year.
The volatility of energy prices in Europe in the fourth quarter, according to Pexapark, has driven up PPA prices and shortened their term. The Swiss consultancy estimates that these contracts will make a new record in Europe in 2021, with 141 agreements signed, up from 90 in 2020. It also places Spain's Greenalia, Opdenergy, and Solaria among the top ten most active operators in this type of contract signing last year, with more than 2 GW of PPAs signed between the three of them.