Implications of the RE100 market boundary change in the context of corporate PPAs

While the change is broadly framed in the context of RE100 members (of which there are currently 399), it will also affect the considerably larger number of corporates reporting to CDP, as it is announced that CDP will now align its market boundary rule with RE100, thus making these changes very relevant for the nearly 15,000 companies currently reporting into CDP.

Previously corporates considering cross-border PPAs in Europe could reference all countries enrolled in the AIB, however now there is a single-market consideration to add to the mix. This means that if a corporate has consumption in Serbia, Iceland, or Cyprus where previously they could consider sourcing EACs for a cross-border PPA, they now must exclude these volumes and instead consider local and onsite PPAs based on these new criteria. For some of our clients, this has meant revisiting planned volumes and either downsizing or breaking down the PPA demand.

To give context to the potential impact, based on data from RE100 members reporting to CDP in 2022, at least 604 GWh of procurement of renewable electricity from 46 RE100 members operating in 24 European countries would not meet the new market boundary definition². And this is only for RE100 companies, the impact is even larger with companies only reporting to CDP.

However, Corporates which have signed PPAs with a Commercial Operation Date (COD) of before Jan 1^st 2024, will be able to still apply the previous market boundary rules and their contracts will be grandfathered until they expire, meaning their credibility would be upheld². This allows some dispensation for corporates with signed PPAs or in advanced negotiation stages whereby the asset is due to go live end of this year. Here the early engagers in PPAs now realize a two-fold benefit by firstly benefiting from high market prices of 2022 and latterly these boundary adjustments.

Mid-term we anticipate that EAC prices will spike in member states’ markets which are now excluded under the single market revision. This will further create a signal that local projects are needed as a more long-term commercially sustainable option for corporates to procure bundled EACs, meaning demand for projects will be higher.

Serbia is interesting in this regard as export to other AIB members was already limited under the EU Renewable Energy Directive’s second revision (REDII) and will continue to be under the forthcoming REDIII. The RE100 technical criteria now fuels an incentive for local renewable energy development in Serbia, as corporates will now require this in order to comply. Previously, the limitation around exporting certificates limited the commercial value for renewable energy developers seeking to export certificates to the European market. For a country which is generally lacking independent projects outside of the subsidized scheme, Serbia will be an interesting market to watch from a renewable energy development standpoint.  

While the demand from corporates for renewable energy projects remains high, there are two obvious routes for member states’ renewable energy markets. Successful development of an internal PPA market remains one option, and the alternative is joining the AIB. It could be that we see those grid-connected countries aligning on membership to the EU single market for renewable electricity, which would allow for trading of certificates, alignment on regulatory framework, and consistent accounting. It also guarantees a grid connection to a country that also maintains these standards.

If you would like to know more about our PPA advisory services for corporates, renewable energy transitioning or setting climate targets for your business, contact us for more information.