PPA prices for German onshore wind show big north-south divide

Power purchase agreement (PPA) prices for onshore wind can vary by over EUR 9/MWh between Germany’s north and south, depending on the geographical location.

Onshore wind plants in the north could see over EUR 8/MWh higher capture cost compared to projects in the south, according to Veyt modelling. Meanwhile, imbalance costs vary by more than EUR 1/MWh depending on grid zone location.

Germany operates 61 GW onshore wind, 79 GW solar and 8.5 GW offshore wind capacity. The majority of these plants receive incentives via the EEG support scheme enshrined into the country's renewable energy law.

However, some 2.5 GW of German onshore wind installations have started 2024 outside the EEG support scheme as their incentive contracts have ended. This brings the total onshore wind capacity that operates on a market basis to 10.3 GW or almost 17% of total installed capacity.

Weaker and more volatile wholesale electricity prices combined with bearish guarantees of origin (GOs) prices may push those installations to seek PPAs rather than hedge their production directly on the market.   

The average German day-ahead baseload price fell to EUR 95.18/MWh in 2023 compared to EUR 235.45/MWh in 2022. Additionally, Germany experienced a record 301 hours with negative prices last year, up from 69 hours in 2022. This trend is likely to intensify this year. This has reduced the profitability of renewable generators on the market.  

The volume-weighted annual average price achieved on the market by onshore wind generators stood at EUR 76.20/MWh last year with the price dropping to EUR 50/MWh in December 2023 for the first time since spring 2021, according to Deutsche WindGuard data.