Offshore Wind: The Missing Link in Romania’s Renewable Energy Ambitions

The discussion on Power Purchase Agreements (PPAs) at Energy Week Black Sea 2025 underscored the complexities and innovations shaping the renewable energy landscape. With the transition from state-supported, fixed-tariff PPAs to more flexible and bespoke agreements, the dynamics of financing and development have transformed significantly.

The New Era of PPAs: Beyond Simplicity

Traditionally, PPAs offered a straightforward approach with predictable steps: state-backed agreements, financial closure, and construction. However, panellists highlighted how this model has evolved into a multifaceted system involving merchant financing, mixed offtake strategies, and innovative structures like virtual PPAs, hedges, and state-supported components. Financiers are increasingly navigating challenges around creditworthiness, risk allocation, and market uncertainty.

One key takeaway was the bespoke nature of modern PPAs. Developers are often negotiating across multiple fronts, balancing diverse offtake strategies and seeking financial instruments to mitigate risks. As one panellist aptly noted, “The reflex to rely on a PPA for safety is no longer straightforward – it demands a nuanced evaluation of its delivery profile and associated risks.”

The Role of Financial Institutions and Metrics

The importance of early engagement with financiers was a recurring theme. Developers were encouraged to leverage the expertise of financial institutions to understand the metrics underpinning project bankability. This includes engaging legal and financial advisors early in the term sheet phase to align contractual and market fundamentals efficiently.

One panellist stressed, “Successful projects start with a solid term sheet, where the right balance of legal, financial, and market considerations is struck early.”

Challenges in Long-Term PPAs

While PPAs are vital for revenue security, finding long-term agreements remains a challenge. Participants shared experiences of navigating markets with limited liquidity, such as Romania, where Contracts for Difference (CFDs) have been met with mixed reviews regarding their bankability.

To address these challenges, panellists proposed innovative financing models, such as merchant basis projects supported by short-term hedges or milestone-based financing facilities. These approaches aim to provide flexibility for developers while securing long-term agreements over time.

Regulatory and Market Considerations

The shift towards market-based mechanisms like CFDs and PPAs has been supported by EU frameworks, including financial stability clauses in the Renewable Energy Directive. However, transparency and regulatory clarity remain critical. The Romanian market, for instance, is seeing incremental progress with secondary legal frameworks and a planned second CFD auction.

Poland’s experience with integrating battery energy storage systems (BESS) highlighted the role of capacity markets and investment aid in driving renewable projects. The focus on aggregator models for balancing responsibilities further emphasised the need for flexibility and adaptability in market design.

The Road Ahead

The discussion concluded with optimism about the future of PPAs as a cornerstone of the renewable energy transition. Collaboration between developers, financiers, and regulators was deemed essential to unlock new opportunities and mitigate risks. As one participant summarised, “Understanding market fundamentals and building strong partnerships are key to navigating this complex yet promising landscape.”

Energy Week Black Sea continues to be a vital platform for addressing these challenges and fostering innovation in renewable energy financing and development.