Brussels, 20 February 2026
EREF welcomes the European Commission’s initiative to remove remaining barriers to power
purchase agreements (PPAs), building on the Commission’s ongoing assessment and the
framework set by the revised Electricity Market Regulation and the Renewable Energy
Directive.
PPAs are key tools, alongside public support schemes and well-functioning forward markets,
for the energy transition by mobilising private capital for new renewable energy generation and
providing long-term price hedging for electricity consumers. They can support industrial
competitiveness and energy resilience, but only if they are supported by clear, investment-friendly framework conditions and if access is broadened beyond a small group of large corporates.
Accounting, risk mitigation, cross-border market functioning, and coherence with public
support schemes remain structural constraints. EREF therefore invites the Commission to
address the following priorities in its Recommendation.
Accounting and financial reporting barriers
Accounting requirements, including IFRS1 treatment and hedge accounting rules, continue to
deter potential buyers and slow down PPA market development. In practice, complex and
uncertain accounting treatment of long-term physical PPAs can discourage corporate
offtakers, particularly those without large in-house financial and legal capacity, and can raise
transaction costs and negotiation timelines.
EREF supports a policy approach that reduces avoidable complexity while preserving
contractual freedom and a high level of market confidence.
Recommendation
The Commission should provide clarifications and encourage simplification of the accounting
treatment of long-term physical PPAs to reduce legal uncertainty and transaction costs.
More predictable accounting guidance would strengthen bankability and broaden the pool
of potential buyers, particularly in markets where PPAs remain underdeveloped.
Mitigating default risks and enabling SME participation
A major obstacle to PPA uptake is counterparty credit risk on the buyer’s side. SMEs in
particular often lack sufficiently strong credit profiles to conclude bankable long-term contracts.
This can translate into higher financing costs for renewable projects, shorter contract durations,
and the de facto exclusion of SMEs and decentralised market actors from PPA-based procurement.
If PPAs are to contribute at scale to renewables deployment and price hedging, risk mitigation
needs to be designed so that it does not privilege only large buyers and large balance sheets.
Recommendation
The EU should promote European and national guarantee instruments, including through EIB
and InvestEU facilities, to mitigate counterparty default risk and make PPAs accessible to
SMEs. Risk-mitigation tools should be designed to crowd in private capital, reduce financing
costs, and enable aggregation and multi-buyer solutions where appropriate, without creating
disproportionate administrative burdens.
Cross-border PPAs and internal market integration
Cross-border PPA volumes remain very limited despite the objective of a functioning internal
electricity market.
In practice, electricity spot prices and PPA conditions vary greatly across Member States,
and cross-border contracting remains complex due to legal and operational fragmentation.
Key barriers include uncertainty around the transfer and recognition of Guarantees of Origin,
balancing group arrangements, network and redispatch risk allocation, congestion exposure,
differing tax treatment, and diverging national contract law and regulatory practices. This
fragmentation undermines the single market’s potential to enable cross-border renewable
sourcing and efficient allocation of renewable generation.
Recommendation
The Commission should develop targeted regulatory simplifications and promote
harmonisation measures that make cross-border PPAs workable in practice, including:
● further harmonisation and mutual recognition of Guarantees of Origin schemes,
● clearer treatment of cross-border balancing arrangements and congestion-related risk
allocation,
● improved transparency and predictability on network charges, redispatch exposure,
and relevant cost pass-through,
● support for standardised templates or model approaches for cross-border PPAs, as
a voluntary tool to reduce legal complexity and increase market transparency.
A more standardised European approach, combined with clearer risk allocation, would
strengthen confidence in cross-border renewable contracting and accelerate uptake across
more Member States.
Interaction between PPAs, CfDs, and state aid rules
Legal uncertainty persists regarding the interaction and possible cumulation of CfDs, PPAs,
and other support instruments. In some Member States, electricity volumes sold via PPAs are
excluded from volumes eligible under CfD-based renewable support schemes, despite there
being no clear requirement under EU state aid rules for such restrictions.
Such limitations can reduce flexibility for project developers, undermine hybrid financing
structures, increase financing costs, and discourage additional private contracting, at
a moment when investment needs to accelerate and diversify.
Recommendation
The Commission should provide clear guidance that the cumulation of CfDs, PPAs, and other
support instruments is permissible within the limits of state aid rules, provided
overcompensation is avoided. Clearer guidance would strengthen investment certainty
and support bankable renewable project pipelines.
Conclusion
PPAs are indispensable tools to accelerate renewable deployment, mobilise private capital,
support industrial competitiveness, reduce exposure to fossil-driven price volatility, and
strengthen Europe’s energy security.
To unlock their full potential, the Commission’s Recommendation should prioritise practical
barrier removal that improves bankability and accessibility, including for SMEs and
decentralised market actors, while supporting internal market integration and coherent
interaction with public support frameworks.
For more information, please contact
Prof. Dr. Dörte Fouquet
Director
doerte.fouquet@eref-europe.org
Dirk Hendricks
Secretary General
dirk.hendricks@eref-europe.org