Record renewable deployment met structural headwinds in 2025, reshaping power price formation, according to Pexapark’s annual report. Utilities and commodity traders expanded their market share, while independent power producers shifted further towards battery storage.
With renewables accounting for nearly half of EU electricity generation, structural volatility and price cannibalisation have shifted from transitional risks to more persistent market features.
PPA price gap stifles renewable project deals
“2025 marked the point at which renewables became the dominant technology block in Europe, but that success brings new and more complex headwinds,” said Luca Pedretti, COO and co-founder at Pexapark. “We are seeing a ‘Big Repricing’, with the focus shifting from capacity build-out to managing structurally higher volatility. The winning model is moving from asset-centric to revenue-centric.”
Utilities with stronger position
In a record year for flexibility in Europe, nearly 12 GW and 23 GWh of battery energy storage capacity were contracted under flexibility purchase agreements (FPAs) and optimisation deals in 2025, roughly tripling volumes seen in 2024. Flexibility purchase agreements are emerging as a key pillar of BESS bankability, unlocking capital and supporting expansion beyond Great Britain into Germany, Italy and the Netherlands.
Why trading – not ancillaries – is crucial for BESS profitability
In contrast, European PPA activity slowed in 2025 as the market adjusted to lower capture expectations. Total disclosed contracted capacity fell to 13.1 GW across 247 deals, down from 15.3 GW in 2024.
Amid these softer conditions, utilities moved more firmly to the centre of power markets, using diversified portfolios to manage volatility. PPA offtake volumes rose by more than 200 percent year on year, while utilities accounted for 77 percent of contracted FPA volumes in Europe in 2025, drawing on portfolio scale, balance sheets and flexibility assets.
Meanwhile, the traditional “invest-and-forget” model for independent power producers is being reworked under tighter market conditions. Value creation is no longer anchored solely in asset ownership, pushing IPPs further downstream into revenue management, structuring and portfolio optimisation.
At the same time, corporate buyers are splitting into two groups: a smaller cohort of more advanced players—particularly big tech—moving towards firm power and utility-style strategies, while much of the wider market continues to grapple with complexity and, in some cases, holds back on procurement.
Spain largest PPA market
Despite the broader slowdown in European PPA activity, Spain remained the continent’s largest market with 3.9 GW contracted, followed by Italy at 1.8 GW and Poland at 1.5 GW. Germany, by contrast, saw the sharpest year-on-year decline among major markets, as severe solar cannibalisation and a widening gap between buyer and seller expectations effectively removed the transactable price range.
EU battery storage up 45 percent to 27.1 GWh in 2025
Iberdrola again ranked as the top global seller, contracting 1,088 MW across 13 deals, while Amazon remained the leading corporate buyer with 711 MW across five deals. “As volatility becomes the dominant market force, flexibility is emerging as the main source of value. Storage, optimisation and portfolio-level strategies are no longer just ways to improve returns; they are essential to remaining bankable and competitive in today’s power markets,” said Pedretti. (hcn)
