PPAs set a new course amid shifting regulatory winds

As Europe’s power sector sets its course towards a greener future, businesses and developers are learning to navigate the winds of regulatory change, at both EU and national levels. Each new directive or package forces PPA market participants to adjust their sails and rethink their strategies. 

The most consequential changes have included revisions to state aid guidelines, reforms to renewable energy support schemes and the ramping up of clean hydrogen strategies. In 2021, the European Commission unveiled revised state aid guidelines for climate, environmental protection and energy, making it easier for member states to support renewable energy projects through competitive tenders or premiums. This led to a stronger focus on market-based instruments but less incentive to conclude a PPA for renewable plant operators. 

Meanwhile, national markets have shifted towards the phase-out of fixed feed-in tariffs, replacing them with market-premium systems or contracts for difference. These changes have encouraged project developers to find new offtakers and financial stability by signing PPAs, increasing market activity in countries such as Spain, Germany and the Nordics. In addition, under the European Union’s 2024 electricity market design, all state investments in renewable energy by member countries must be carried out via two-sided contracts for difference, which could make PPAs more attractive.

Finally, the EU’s push for low-carbon hydrogen, following the 2020 hydrogen strategy and the introduction of regulatory “green” criteria, has triggered early interest in hydrogen-linked PPAs. As reforms converge towards more market-driven mechanisms and stricter sustainability standards, PPAs have remained a vital tool for long-term renewable power procurement, risk management and corporate decarbonisation. 

Good on paper 

The message from the latest EU reform is clear – less bureaucracy, more space for growth. And Brussels appears to have delivered on this, at least on paper. Its Omnibus package, which partially came into effect in February, is a step towards regulatory relief. 

It aims to streamline sustainability reporting for EU industry and reduce the administrative burden for firms subject to the Corporate Sustainability Reporting Directive (CSRD). While some market experts have welcomed the move, others – especially in the PPA sector – are more dubious. 

PPAs have grown as a green solution for energy-intensive companies in recent years – not only as a hedge against volatile electricity prices but also as proof of sustainability as part of their corporate social responsibility (CSR) strategies. The CSRD was a key external driver here – a regulatory lever that made PPAs more attractive, particularly for companies aiming to cut Scope 2 emissions and improve transparency in their energy sourcing.

What is the CSRD? 

The CSRD is a European directive, phased in since 2023, that aims to improve and standardise sustainability reporting across the EU. It imposed much stricter requirements as companies must now disclose detailed information on environmental, social and governance (ESG) factors. Reports must align with the European Sustainability Reporting Standards (ESRS), which seek transparency, comparability and auditability. For energy procurement, this means companies must provide certified, traceable evidence of their renewable electricity sourcing – including guarantees of origin, risk assessments and strategic classification. The CSRD has therefore been a driver for long-term green power contracts – a dynamic now partly tempered by Omnibus. 

For companies once propelled forward by the strong tailwinds of robust sustainability regulations, the Omnibus Package introduces a patch of lighter airs – and perhaps a need to chart new routes through less predictable conditions. 

Relief ahead 

The proposed Omnibus rules could slow the trend of CSRD as a driver for PPAs. In its proposals, the European Commission suggests relaxing reporting obligations – companies with fewer than 1,000 employees and less than EUR 50m turnover would no longer be covered by the CSRD. This would exempt around 80% of companies previously affected. Instead, a delegated act would introduce a voluntary standard for these companies, based on EU sustainability reporting principles for large, small and medium-sized enterprises. At the same time, some CSRD obligations would be delayed by up to two years. Those larger firms that still fall under the directive must keep reporting under the ESRS, with simplified standards to come after Omnibus. The message is clear – less bureaucracy, more space for growth. 

Reduced pressure to report on sustainability means reduced pressure to use green procurement tools such as PPAs – at least for now. This is particularly relevant for medium-sized businesses, many of which were only just starting to focus on sustainability through CSRD compliance. Without a regulatory push, PPAs may go back to being a purely strategic option, not an obligation – potentially lowering market liquidity.

With fewer companies needing to disclose sustainability performance, the incentive to sign PPAs may weaken for some businesses. This could mean a drop in demand, less competition for available projects and lower PPA prices. Combined with other pricing factors, such as falling value from renewable energy assets, it may create a tougher environment for PPA providers. 

However, demand may stabilise among large, CSR-driven companies still covered by the CSRD – at least for corporate PPAs. These firms have stricter demands for the quality of green power – for example, additionality, regionality and long-term impact. So, demand from these quality-conscious buyers could support or even increase prices. Additional drivers, such as hydrogen PPAs, may also help offset declines elsewhere. 

Turning point, not a dead end 

Omnibus aims to bring some calm – but it may also leave many in uncharted waters, searching for steady signals where trust and standardisation are needed most. The PPA landscape has already been altered by other recent reforms, such as the shift away from fixed feed-in tariffs, the move towards market-based support schemes and new state aid rules to support renewable energy. National and EU-level strategies – from stricter sustainability standards, to new frameworks fostering green hydrogen projects – continue to drive changes in how companies secure and value renewable power. 

For the PPA market, momentum will continue – though now it is the voluntary ambition of corporates, rather than a steady regulatory breeze, filling their sails. The delay to CSR reporting obligations came into force on 17 April but the rest of the package is still under review. This means a significant portion of PPA demand in Europe now hinges on what the European Union decides to do next. As companies navigate these shifting winds, the ability to adapt will be key to charting a successful course for renewable power deals in Europe’s energy transition.

This article originally appeared as a column on www.montelnews.com