Activity surged in Europe's renewables power purchase agreement market in 2023 with 272 long-term deals signed by corporate and utility offtakers, a 65% increase compared to the prior year, analytics firm Pexapark said in its annual report Jan. 29.

Volatility in commodity markets eased in 2023, giving more counterparties the confidence to sign power purchase agreements (PPAs), Pexapark said. Regulatory uncertainty, for instance in the form of windfall taxes, also abated.

Yet, higher financing costs tested some transactions, Pexapark noted. 2023 was the first full year since tracking of deals began where financing challenged the PPA market, the firm added.

"Certain assets did not manage to make the economics work, with some PPA negotiations ... paused for the time being," Pexapark said.

The first quarter of 2023 saw the highest transaction volumes of the year, with a total of 5.5 GW signed.

More than half of the volumes contracted in 2023 were signed in Spain and Germany. While Spain outperformed the second-busiest market significantly in prior years, it is now followed closely by Germany, Pexapark said. The country's solar and offshore wind sectors met "exceptionally high demand" from industrial offtakers in 2023.

The lion's share of deals, equating to 10.5 GW, involved solar projects, Pexapark said. Onshore wind saw 2.3 GW worth of transactions, and 2 GW of offshore wind PPAs were signed.

Spain's Iberdrola SA emerged as the top seller by deal volume in 2023, having signed nine transactions with corporate buyers totaling 908 MW.

Norway's Statkraft AS signed the highest number of deals. Its 19 transactions were spread across eight countries and across hydro, solar and onshore wind.

The busiest buyer among corporate offtakers was Amazon.com Inc., which signed 1.87 GW across seven deals in Europe. Google LLC and miner Umicore SA followed with six and five deals, respectively.

The IT sector was the most active in Europe's PPA market, with a total of 3.65 GW signed in 2023. It was followed by the consumer staples segment, across which 1.52 GW were dealt in 2023.

"New names and profiles are constantly coming into the mix, which increases the market's healthy competition and liquidity of offtakers," Pexapark said.

Pexapark observed a "permanent shift" in companies' renewables procurement strategies during 2023.

What had started as "panic buying" in 2022 due to companies searching for stable energy prices has now turned into a sustained reliance on PPAs for at least part of companies' energy needs.

Pexapark also observed the first renewables PPAs involving green hydrogen and ammonia plants, with deals announced in Norway, France and Germany.

Abundant baseload hydropower in Norway is attracting green hydrogen hopefuls such as Fortescue Future Industries Pty. Ltd. and Aker Horizons ASA, which signed PPAs with Statkraft during the year.

Iberdrola's German offshore wind farm Baltic Eagle will also supply a green hydrogen client in the form of steelmaker Salzgitter AG.