Q&A: BayWa’s Spanish PPA tender is on track, but what about Germany?

Earlier this year BayWa issued Europe's first-ever tender launched by a developer for corporate power purchase agreements (PPA), with energy coming from a portfolio of renewable projects that the company has developed in Spain.

The first PPA resulting from the deal is expected to be announced before the end of this summer, and a further tender - this time in Germany – is due to be launched at the start of 2024.

inspiratia caught up with Daniel Parsons, head of PPA at BayWa, to discuss the tender, as well as how the company is battling slow project approval processes across Europe.

Daniel Parsons, head of PPA at BayWa

The Spanish PPA tender is up and running now. How has the process developed?

In September [2022], we launched a request for information (RfI) to gather information from corporates in order to understand what was required so we could then tailor the next step, the request for proposals (RfP). The RfP was then launched in early February of this year [2023], with bidders having four weeks to prepare their bids.

We decided to focus the tender only on Spain after initially planning to include also German projects. This was mainly because our Spanish projects were more advanced than our German ones. The German tranche of the tender will therefore be issued in the first quarter of 2024.

We had a healthy competition and saw attractive bids. We are now in the phase of evaluating and discussing the shortlisted bidders.

Did the number of bids surpass your expectations?

We were very happy with the turnout and the interest in general, and in terms of the number of participants – it was in line with our expectations. We are happy with the quality of the counterparties and the bidders that we have. They are all bankable and well-educated about the sector and have a high level of knowledge about power purchase agreements (PPAs).

We have seen a strong interest in the German renewable edition of the tender, which was to be expected given that in Germany, most of the wind capacity is going into the state auction, and the solar pipeline in the country is advancing more slowly, mostly due to planning permission backlogs.

Because we were only focusing on Spain in this tender, some companies which confirmed interest during the RFI didn't participate because they only have an interest in Germany.

When do you expect the first PPAs to be announced as a result of the Spanish tender?

We expect the first PPA in the Spanish tender to be announced in the summer of this year [2023], with more PPAs potentially being announced before the end of the year. If this is achieved, it will be an excellent result because it will prove that the new process offers a quick turnaround and a streamlined process for the counterparties.

Were there any patterns that you saw in the type of companies that opted to take part in the process?

The only obvious pattern was that a large majority of the bidders have experience and knowledge of the PPA market, which is interesting. As is the case with most corporates, PPAs are not their main business, so they of course get advice and assistance, or they are big tech companies that have their own departments dedicated to renewables policy.

Will the German tender prove more popular than the Spanish one?

Most likely, for two reasons. Firstly, we will probably have fewer projects in the German tender. Secondly, we have also seen greater interest in the German process. Judging from the early RfI, interest in the German tender represents a two-fold increase on what we saw with Spain. This is the case because of the healthy pipeline of projects in Spain. There is a lot of capacity coming into the market in 2025 on the solar side especially.

In Germany, there are fewer projects, and if you look at the companies involved there, they are large industrial consumers with considerable power requirements, making the interest high. We are considering launching an RfI in Germany to engage with the market in the Autumn [2023], with the German tender hopefully set to launch in early 2024.

Do you plan to launch further tenders in other geographies?

We plan to focus on Germany and Spain for now, but the tender process has been built in a way that allows it to be transferred to other markets.

We set out to streamline the PPA process and to develop a proactive approach to the market instead of responding only to RfPs from Corporates. In the future, we would certainly look to hold tenders in other markets which are high in demand: for example, we could think of Italy, France and the UK if we see good interest.

Planning permission backlogs are delaying the construction of new projects across Europe. How is BayWa dealing with this problem? Will recent government moves in Italy and Germany to simplify processes help to solve the problem?

Yes, there are national plans to solve planning issues, and there is the political will in Germany certainly to make these decisions happen faster, which is movement in the right direction. However, it will take time until these legislative actions actually filter through to local authorities.

I think we are yet to see major advances in turning projects around more quickly. Therefore the projects which are due online in 2025 are still in the approval stage, and we are actually seeing a bit of a backlog at the moment at the local authority level. Therefore we expect even slower progress than we have seen in the past, due to the sheer amount of projects coming through. So governments, given the scale of the climate challenge we face, should be increasing their efforts to beat this problem.

But, we can't only blame others in the market. We in the industry also have to do something to improve the situation.

One area in which we are trying to help is by championing the dual use of land to improve the chances of local acceptance of new projects. For example, our innovative agri-PV system, which allows farmland holding PV panels to be still farmed and floating solar- both solutions that use space differently, can help with obtaining planning permission and can improve the chances of projects gaining local acceptance.