On the surface, 2025 appeared to offer supportive conditions for renewable developers seeking long-term offtake. Wholesale electricity prices increased across most European markets, and renewable generation continued to expand. Yet PPA activity softened rather than accelerated.

The explanation sits less with headline prices and more with how those prices translated into bankable revenues.

For developers, declining capture rates materially altered the economics of merchant-exposed assets. Solar generation in particular faced record levels of cannibalisation during high-output periods, compressing realised revenues relative to baseload prices. This erosion undermined the implicit protection that pay-as-produced PPAs historically provided, especially in markets with dense solar deployment and limited flexibility.

Volatility compounded the challenge. The increasing frequency of zero and negative price hours introduced greater uncertainty around shaping and imbalance costs. These risks were no longer marginal adjustments; they became core valuation drivers. In 2025, balancing costs and capture risk were often large enough to offset the benefit of higher average prices, particularly for assets without storage or portfolio optimisation.

Financing conditions also tightened. Lenders showed greater scrutiny towards merchant exposure, capture assumptions, and counterparty resilience. Where PPAs were available, pricing often failed to bridge the gap between fair value and the revenue levels required to clear investment hurdles. In parallel, subsidy frameworks and state aid mechanisms reduced near-term urgency for some buyers, limiting demand for long-tenor PPAs

The result was not a collapse in developer interest, but a pause. Project pipelines continued to grow, yet contracting activity slowed as market participants reassessed risk allocation and structure.

This dynamic sets the context for 2026. Developers that adapt contract structures to reflect capture volatility, balancing exposure, and flexibility value will be better positioned as the marked consolidates.

Read the full PPA market review of 2025 and outlook for 2026 for detailed regional breakdowns, valuation benchmarks, and developer-specific implications.

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