Renewable energy prices across Europe have started to recover from a 15-30% plunge across key markets in March, according to clean energy power purchase agreement (PPA) software provider and advisor Pexapark.
According to Pexapark’s composite European index, renewable energy prices have recovered from €32.88/MWh ($35.77MWh) on 23 March to €36.36/MWh as of 9 April, although they still remain below levels seen late last year.
While this is good news, said Pexapark, it points to the importance of risk management for the renewable energy sector.
“Many developers and investors are placing PPAs on hold, as the market conditions make any deal financially unviable. The coronavirus pandemic has led to very high levels of volatility in the market, reflecting uncertainty over the end of lockdowns and the associated power demand increase,” Pexapark chief operations officer Luca Pedretti said.
“Sourcing, structuring, pricing, negotiating and finally closing (long-term) PPAs are complex processes that require time.
“When prices recover, the industry cannot afford to restart these deals from scratch. For this reason, most investors continue to advance and prepare, albeit at a slower pace than when prices are higher.”
To successfully navigate turmoil, renewable energy players will need to adopt more robust risk management techniques used by trading companies, such as maintaining the ability to quickly sell large energy positions and act flexibly upon price movements, Pedretti added.