Energy Transition

Beyond subsidies for European renewables

Renewables are hitting their stride in Europe, but there's still a long way to go, with trillions of additional investment required.

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By Ralph Ibendahl, Nico Mazzoli and Matthew Coakes
Published July 12, 2021 | 4 min watch
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Key Points

  • Many markets for renewables are still based on renewables but the market in the Nordics and Spain are now mainly by corporate power-purchase agreements, rather than subsidies
  • The future for renewables growth will have to be beyond subsidies
  • For emerging technologies like CCUS and Power-to-X, government support will be essential to help attract investment

New technologies and innovation power the energy transition, but they have to be supported by government policy, frameworks and often, subsidies. As the solar and wind markets have matured, new market mechanisms such as corporate power-purchase agreements (PPAs) have taken the place of government subsidies. But the swift and retroactive withdrawal of subsidies for wind and solar in Spain in the early 2010s show how easily a new industry can be dampened. Today, with the introduction of corporate PPAs, that industry is once more a world leader, but over five years of growth were lost.

“When we think about the future of renewables, we have to talk about unsubsidized renewables. This is really the future as subsidies roll off or are removed completely as the technology has matured.”

Ralph Ibendahl, Managing Director & Head of EMEA Energy Transition, RBC Capital Markets


Corporate PPAs were born out of necessity, giving investors a floor as to what power prices could be in order to value potential transactions. They are an increasingly popular financing tool in the Nordics and Spain, where more PPAs are signed in a single month than the rest of Europe, offering investors guaranteed revenue streams and giving customers supply security.

As a recent example of a PPA in action, RBC Capital Markets advised Vattenfall on the sale of a 49.5% stake in Vattenfall's Dutch offshore wind park HKZ to BASF. HKZ is a zero-subsidy project and, once fully commissioned, will be the largest in the world. By acquiring the electricity from the wind farm for its ownership share through a long-term PPA, BASF will be able to procure green electricity for its production sites in Europe.

Other technologies are developing across the industry, such as in storage, green hydrogen and other renewable solutions, where government support is crucial.

Investors are only attracted to the space when its stable and supported politically. To build a sustainable renewables sector means embracing unsubsidized renewables, but to encourage the investment needed for newer technologies, political support has to be steady. There’s plenty of capital in the market today available to emerging technologies. As costs come down, these technologies will eventually be able to sustain themselves, as solar and wind are today.

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