Long-term offtake is no longer just a finance tool. It’s becoming market infrastructure, a hedging instrument, and a strategic corridor policy.
Across Europe’s South-East (SEE), the Eastern Mediterranean and North Africa, power markets are being reshaped by three simultaneous forces: (1) corporate decarbonization and electrification, (2) persistent price volatility and congestion, and (3) a new wave of interconnectors designed as “energy bridges” between resource-rich regions and demand centers. In that setting, Power Purchase Agreements (PPAs), and especially cross-border PPAs, are evolving from bilateral contracts into strategic instruments that can underwrite new generation, influence trade flows, and increasingly, support industrial policy. The EU’s 2024 electricity market design reform explicitly elevates PPAs and long-term contracting as a stabilizing mechanism for consumers and investors, while keeping marginal pricing in short-term markets. In parallel, the EU’s Carbon Border Adjustment Mechanism adds a trade dimension to clean power procurement by putting a carbon cost on imports of carbon‑intensive goods (including electricity). It raises the value of competitively priced low‑carbon electricity and long‑term contracts such as PPAs for energy‑intensive industries exposed to global competition.
Why PPAs are now “system tools” (not just corporate procurement)
Classic PPAs were built to solve a narrow problem: give developers bankable revenue and give buyers a hedge. Today they are asked to solve much more. Mitigate exposure to fuel-linked price spikes, de-risk renewables investment without open-ended subsidies and help deliver competitive electricity for industry. For policy makers, this is a quiet but consequential shift: the state is moving from “setting prices” to “crowding in private contracting,” while channeling public support for new low-carbon generation through two-way Contracts for Difference (CfDs) or equivalent schemes where needed.
Cross-border PPAs: The promise and the core tension
Cross-border PPAs emerge when renewables can be built cheaper (or at higher load factors) in one zone than the buyer’s home market, and when cross-zonal trade and settlement can translate that advantage into a credible hedge. In the EU, the “plumbing” for this is increasingly sophisticated: Single Day-Ahead Coupling (SDAC) is designed to allocate scarce cross-border capacity efficiently via a common algorithm while respecting transmission constraints; crucial for price formation and liquidity across coupled markets. But the defining tension is that electricity is physical and local, while corporate claims and capital are global. Most cross-border PPA structures therefore combine (a) a price hedge (often against a hub index) with (b) the transfer of energy attributes (Guarantees of Origin, GOs).
The key risk in EU/SEE: Basis, congestion, and “delivery anxiety”
For traders and sophisticated buyers, the main operational risk in cross-border PPAs is basis risk. The difference between the project’s realized price (and profile) and the buyer’s hedged reference price, amplified by congestion and curtailment. ACER’s monitoring of cross-zonal capacity highlights persistent price differences between bidding zones and the value of more interconnection availability; it also warns that incomplete implementation of the “70% rule” (making at least 70% of physical capacity available for cross-zonal trade) can reduce welfare and exacerbate volatility. Implication for PPA design: contracts increasingly need congestion-aware pricing points, curtailment allocation, and shaping/firming provisions; or a portfolio strategy across zones rather than a single “hero” cross-border offtake.
Interconnectors as the new geopolitical enablers: North Africa to Europe
Where cross-border PPAs become truly strategic is when they are paired with new interconnection infrastructure that can unlock large-scale renewable exports. The Tunisia–Italy ELMED HVDC link is emblematic: a 600 MW submarine interconnector jointly implemented by Tunisia’s STEG and Italy’s Terna, with EU support (including Connecting Europe Facility funding) and multilateral financing to enable commercialization and regulatory readiness. This sits within a broader EU infrastructure framework. The revised TEN-E regulation aligns cross-border energy infrastructure planning with the European Green Deal and introduces Projects of Mutual Interest (PMIs) with third countries; explicitly creating a policy pathway for EU–neighborhood interconnections. For corporate buyers, the opportunity is not just “cheaper MWh,” but diversification of supply sources and exposure to higher solar capacity factors.
The Eastern Mediterranean corridor: From concept to contracting logic
The Eastern Mediterranean is simultaneously pursuing multiple “energy bridge” concepts. The European Commission frames the EuroAsia Interconnector (Israel–Cyprus–Greece) as a Project of Common Interest that can enable bidirectional flows and integrate renewables via a major subsea HVDC corridor. Parallel to that, Egypt–Greece interconnection plans have gained institutional momentum. The Commission’s Global Gateway description of GREGY explicitly anticipates renewable electricity exports backed by “bespoke PPAs,” positioning contracting as a core commercialization mechanism; not an afterthought. The takeaway for senior market participants: these corridors are not merely transmission projects; they are contracting ecosystems that require bankable long-term offtake, attribute credibility, and market-compatible dispatch and balancing frameworks on both sides.
Innovative solutions in energy trading are now emerging across Europe, Central and Western Asia, and North Africa
They all share a common aim: turn interconnection and renewables growth into bankable, tradeable, dispatchable value. In Europe, the push toward finer market granularity (including the move toward 15‑minute products in the coupled day‑ahead market) is improving hedging precision and reducing balancing friction for variable renewables, creating space for new “shape,” flexibility and storage‑linked contracts. At the same time, the attribute layer is becoming a true risk‑management market: physically delivered, cleared Guarantees of Origin futures bring price discovery and collateral-efficient hedging to corporate claims and trader books. Beyond the EU, regional trading architectures are also maturing: the GCC Interconnection Authority (GCCIA) is formalizing cross‑border electricity exchange through a dedicated market platform and settlement framework, while extending interconnection to neighbors such as Iraq. An institutional model for scaling short‑term trade and reserve sharing. Meanwhile, new “green corridors” are being designed explicitly as tradable export routes, such as the Black Sea HVDC link linking the South Caucasus to Southeast Europe, signaling that the next phase of energy trade will combine transmission, market rules, and long‑term offtake into a single commercial system.
Dr. Eng. Marios Stanitsas
Director of Energy Department
LDK Consultants
