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The Italian market is characterized by a large diversity in power off-takers, which includes both local and international players. Since Italy is still a relatively emerging market in terms of the power purchase agreement (PPAs) space, only a few deals have been closed. However, we are seeing a reasonable risk appetite for long-term PPAs. Many of them are actually already in negotiation.
A variety of PPA structures are currently being offered in the Italian market, mostly related to relatively small transaction sizes and projects on the 5-10 MW scale. In terms of tenor, the long-term PPAs are mostly still limited to a maximum of 10 years, due to risks associated with a nascent market still characterized by limited transparency. In Italy, it’s a challenge to get quotes on price areas in a similar fashion as is commonly the case in the Nordics. That’s due to the fact that the Italian market offers fewer price zone hedging products in comparison to the Nordic markets. Right now, long-term PPA prices in Italy are estimated to be at a €49.05/MWh price point for a 10 MW solar farm, assuming a fixed-volume PPA structure based on PUN price.
Italy is also characterized by low liquidity on the forward market, making risk management and price transparency more complex. In addition, given that the Italian market is a relatively new market in terms of PPAs, guarantees on the lender side have been untested. This is important, as the market is likely to end up with relatively high guarantee requirements, as is currently already the case in Spain. The key question here is: will the Italian market generate as much traction as the Spanish market?
In order to help developers, investors and producers better understand the market dynamics, Pexapark is providing more transparency in this uncertain market, by providing intelligence on long-term PPA prices across Europe. This initiative is a first in Europe.
The analysis is conducted through a state-of-the-art valuation model for energy price risks. It values long-term PPA in the same manner as traders and utilities do, with consistent market price calibration, providing accurate long-term PPA prices for renewables.
Luca Pedretti, Co-Founder and COO of Pexapark: “If you need long-term PPA prices for your renewable project, it is not necessarily difficult but very time-consuming. You must go out to the market, sign multiple NDAs and procure a lot of quotes. To simplify the process and bring transparency, we have built our own model, as off-takers have, and are able to calculate exact PPA Prices for your renewable energy project.”
You can subscribe to Pexapark’s website to get the latest PPA Prices for the Italian market (for Free).
Pexapark, the renewable Swiss FinTech, provides advisory and enterprise software for the monitoring and management of renewables in open markets. The start-up, founded in 2017 by Michael Waldner, Luca Pedretti and Florian Müller, has grown rapidly working for more than 3,000 MW of renewable projects throughout Europe and the US.