Renewables firm of the year: Axpo

Energy Risk Awards 2024: Swiss utility signs raft of pioneering PPAs to kick off vital renewables projects across Europe

Domenico Franceschino, Axpo

Renewable energy capacity in Europe has surged in recent years but much greater deployment rates are required from here if the European Union is to meet regulatory targets. This poses huge challenges for developers, investors and green energy consumers alike.

Axpo, winner of Energy Risk’s 2024 inaugural Renewables firm of the year award, has successfully addressed these challenges with numerous pioneering deals that are driving the deployment of vital renewables projects across Europe. Over the past 18 months, the Switzerland-based utility has completed 30 power purchase agreements (PPAs) including the first ever PPA in Greece, the first wind power PPA in Croatia, and the first corporate PPA in Slovenia. The firm’s groundbreaking work in countries with illiquid power markets has also provided the funding security needed to get the projects off the ground.

“These PPAs allow plants to be developed in countries where the markets are not yet very mature and provide the opportunity for companies across Europe to buy green power, some for the first time,” says Domenico Franceschino, head of origination West & East Europe and member of the management board at Axpo Solutions. “We’re able to create market liquidity and guarantee long-term fixed rates to a renewables plant so they can get the support from lenders and funders to develop their facilities.”

Generation from renewable sources now meets 23% of the EU’s total energy consumption, up from 12.5% in 2010, according to EuroStat.  However, the revised Renewable Energy Directive sets a binding target of achieving 42.5% of total energy consumption from renewables by 2030.

Doubling the deployment levels of the past decade will be challenging. While corporate appetite for clean energy is rising, recent price volatility and higher energy costs mean few firms can commit to buying green energy on the open market on a long-term basis. Meanwhile, developers and investors are facing high inflation, rising infrastructure costs and falling subsidies. Additionally, hedging opportunities in many jurisdictions are limited due to illiquid power markets in many areas.

Working in regions with illiquid markets requires blue-sky thinking. “This is not a standard business. The solution is different for each country,” says Franceschino. “What I’m very proud of is that, very often, the solutions we develop are something completely new that hasn’t existed before.”

Such projects require strong collaboration between stakeholders and need a company that understands and meets the key objectives of each stakeholder. “The challenges were so complex that these projects needed a utility with specific expertise, risk management skills and clients in certain areas,” Franceschino says.

The groundbreaking PPA in Greece, signed in mid-2022, was a solar power deal with Macquarie subsidiary Cero Generation to build a 100-megawatt (MW) plant in the Drama region. Axpo committed to buying all the plant’s physical production at a fixed price for 10 years, despite the absence of a liquid power market beyond two years in Greece and lack of long-term demand in Greece. 

The plant’s annual output is estimated at 150 gigawatt hours (GWh), equivalent to the electricity demand of around 15,000 households. Having bought the power at a fixed price, Axpo will use its extensive network of clients across Europe to sell into neighbouring countries where power prices are correlated to Greece.

This concept was replicated with PPAs in Serbia and Croatia in 2023. Axpo signed the first long-term wind power PPA in Serbia in February 2023, a 10-year agreement with IVICOM Energy doo Zagubica for construction of a 105MW wind farm in Krivaca. The project will generate enough green electricity for more than 75,000 households, while saving 115,000 tonnes of CO₂ emissions a year. This was followed in March 2023 by the first long-term wind power PPA in Croatia. The 10-year agreement covers nearly 1.8 terrawatt hours (TWh) of green electricity generated from a new onshore wind farm in the Zadar region. The facility aims to supply green energy to 85,000 homes and reduce CO₂ emissions by more than 78,000 tonnes annually.

“These projects were particularly challenging as there is currently no liquid market for buying physical green power in Serbia or Croatia,” says Franceschino.

As a result, Axpo worked closely with the project sponsors to create innovative new offtake structures that involve selling the physical power in Hungary and other regional markets where it is possible for Axpo to guarantee a long-term fixed price.

At the opposite end of the spectrum, Axpo is also adding value in markets that are extremely liquid, as demonstrated by the signing of a corporate PPA in May 2023 with Germany-based silicon wafer manufacturer Siltronic.

Under the 10-year agreement, Axpo will procure 60 gigawatt hours (GWh) of renewable energy annually from photovoltaic plants in Germany and deliver it to Siltronic’s two production facilities. This corresponds to the annual consumption of more than 20,000 households in Germany and is the equivalent of saving more than 25,000 tonnes of CO₂ emissions a year. The PPA allows Siltronic to achieve its sustainability goals while also giving certainty over exactly how much green power its facilities will receive every hour for the next 10 years.

“This deal shows we can play a role in all types of markets,” says Franceschino. “In this market there was a lot of competition and the fact that we were selected shows the trust our clients have in us. To be in a market you have to add value, take risk from your partners and manage that risk effectively.”