Wood Mackenzie: European renewable power market surges on 19GW of new capacity

The European renewable energy power market demonstrated a strong recovery in 2024, with nearly 19 gigawatts (GW) of new capacity contracted under purchase agreements, according to Wood Mackenzie.

A surge in PPA activity with Spain and Germany leading the market, accounted for 30% of total capacity across Europe, according to the latest Europe Renewables PPA Tracker report released by Wood Mackenzie. Solar PV and wind projects represented approximately 80% of contracted capacity, with each technology contributing similar volumes. Poland, the UK and Greece entered the top five across all deal types (corporate, route-to-market and utility), Wood Mackenzie said.

According to Eurostat, the official data platform of the European Commission, the share of renewable energy in Europe almost tripled between 2004 and 2023.

The EU reached a 24.5% share of its gross final energy consumption from renewable sources in 2023, around 1.5 percentage points higher than in 2022 and almost 3 times higher than in 2004 (9.6%). The EU Directive 2023/2413 on the promotion of the use of energy from renewable sources has revised upwards the EU’s 2030 renewable energy target from 32% to 42.5% (with an aim to increase it to 45%).

Emerging trends in contract structures

As the power purchase agreement (PPA) market matures, innovative contractual arrangements are becoming more prevalent, Wood Mackenzie said. Notably, there's an increase in deals involving renewables co-located with battery storage, addressing the challenge of negative pricing periods.

“We're seeing a shift towards more sophisticated PPA structures,” said Dan Eager, Research Director, European Power & Renewables at Wood Mackenzie. “While still a small part of the overall market, hybrid storage arrangements that combine renewables and batteries in a single contract are gaining traction, particularly among energy-intensive industries and data centers seeking 24/7 energy matching.”

Corporate agreements lead the way

Corporate PPAs continued to dominate the market, representing over 70% of the regional market, with route-to-market deals the next most common. "The technology and data sectors were the primary drivers of offtake activity in 2024," noted Eager. "These power-intensive businesses are increasingly relying on PPAs to sustain their future operations and meet sustainability goals."

Complex pricing dynamics

The report indicates a complex pricing environment at the start of 2025, influenced by factors such as curtailment risk, negative pricing, and retail price evolution. While PPA prices declined in 2024 alongside wholesale power prices, the outlook varies by region and technology. “Our analysis shows that Iberian markets offer particularly appealing conditions for both solar PV and onshore wind PPAs,” Eager explained.

Wood Mackenzie’s fair value outlook for 2026 suggests continued opportunities for competitive PPA arrangements, especially in solar PV and select onshore wind markets. The report also anticipates the emergence of hydrogen PPAs in Europe, contingent on regulatory clarity.

Continued offtake opportunities in 2026

“The growing influence of low-cost renewables on wholesale price formation, particularly in spring and summer, is leading to increased volatility and uncertainty. Our wholesale market modelling indicates that capture rates are set to decrease over the next five-to-seven years as demand growth lags renewable supply additions and the flexible capabilities of markets are stretched,” Eager said.

“Over this period average market prices will also be falling as European gas prices decline. In turn, the capture price and risk components in PPA pay-as-nominated prices will evolve. While market conditions vary, our fundamentals-based forecasting indicates that there are still opportunities for mutually beneficial PPA deals. The key will be navigating the complexities of each market and technology to find the right fit for both developers and offtakers,” he added.