Electron Bank: Powering Europe’s Clean Industrial Future
As Europe’s industries struggle with volatile electricity prices, the European Commission sees Power Purchase Agreements (PPAs) as crucial for cost stability and competitiveness. To truly stabilize power prices, PPAs need to be firmed with clean flexibility. But, price gaps persist for these round-the-clock PPAs. The Electron Bank, a new policy proposal, bridges this gap – stabilizing industrial power prices with firmed PPAs while driving investment in clean generation and flexibility.
Europe’s industry is in crisis, exacerbated by expensive and volatile power prices, but tools are being developed to meet this challenge. The Clean Industrial Deal published today stressed that power purchase agreements (PPAs) are “key to making clean energy production more attractive for industrial users and final energy bills less dependent on volatile fossil fuels in short term markets”. Furthermore, the European Commission stated that it “will seek Member States’ views on a clean flexibility instrument based on PPAs and industry committing to consume clean electricity”.
Aligned with this commitment is the Electron Bank, a targeted policy proposal. It is designed to power clean industrial growth by providing long-term price stability through firmed PPAs. It would be based on an auction-based mechanism to help bridge the clean firming premium for PPAs.
The Challenge: Price Volatility and Incomplete Solutions
Figure 1 – Illustrative Graphic of PPA Firming
Current renewable sourcing solutions, such as single-technology renewable PPAs, only address part of the problem. While they provide fixed prices during periods of high renewable output, they leave industries exposed to market volatility when renewable generation is low and electricity is most expensive. Additionally, the clean flexibility technologies that can be used for firming, such as storage, long-duration energy storage (LDES), and enhanced geothermal, are at various stages of commercial scale-up, creating a cost gap for firmed PPAs in most cases (for detailed analysis for firmed or “24/7” PPA prices see here, here and here). Without a mechanism to bridge this gap to scale clean hedging instruments like firmed PPAs (which bring significant value as shown here), Europe risks losing its industrial base and stalling its net-zero transition.
The Solution: Electron Bank and Firmed PPAs
Figure 2 – Electron Bank Mechanism
The Electron Bank proposes a targeted support mechanism to enable clean, firm power through long-term PPAs. Inspired by the EU Hydrogen Bank, the Electron Bank would facilitate auctions where industrial buyers bid for firmed (e.g 90%, 100%) clean PPAs with support covering only the gap or “Clean Flexibility Premium” between the cost of supply and the industrial off-takers bid price.
Figure 3 – Clean Flexibility Premium
The Electron Bank has several key benefits:
Competitive Auctions: Industrial consumers submit bids for firmed clean electricity. Suppliers, combining renewable generation with clean flexibility solutions, offer prices. The Electron Bank bridges the cost gap, ensuring efficient use of public funds.
Technology-Neutral: The mechanism allows the market to select the best mix of clean technologies to achieve firm, new clean power without picking winners.
Industrial Focus: By supporting long-term hedging for industrial buyers, the mechanism protects them from price volatility while enabling renewable deployment. Analysis shows significant hedging benefits from clean-firmed PPAs.
Clean Flexibility Incentives: The firmed PPA model drives investment in storage and demand response solutions, essential for a fully decarbonized power system. It also ensures that industrial demand response is incentivized as only a portion of industrial demand is covered.
National Participation: Aligned with the ‘auctions as a service’ model under the EU Hydrogen Bank, Member States could financially contribute to further auctions, enhancing the overall pool of support.
The Impact: Delivering Clean Power Efficiently
Figure – Comparative Benefits of Electron Bank
The Electron Bank brings key advantages by seeking to drive maximum impact per euro spent. It complements other support schemes like Contracts for Difference (CfDs) which are critical for scaling renewables. Unlike these mechanisms which focus on supply-side single-technology support with unclear direct hedging benefits for industry, the Electron Bank supports clean generation and flexibility delivering direct access to stable clean energy prices for industry. For every euro of public funds deployed, it likely delivers more MW of clean power and flexibility than CfDs, thanks to the industrial co-financing inherent in the PPA model. It could create a valuable new element of the ‘value stack’ for flexibility assets, de-risking investments through long-term price signals. It also ensures that supported projects are additional and clean-only, accelerating the deployment of new clean capacity while phasing out fossil fuels used today for flexibility.
Aligning with Key EU Policy Objectives
The Electron Bank is directly aligned with major EU industrial and energy policy goals:
Clean Industrial Deal & Affordable Energy Action Plan: Supports the decarbonisation of Europe’s industrial base through access to stable, low-cost clean power.
EU Electricity Market Design Reform: Advances PPAs with a strong focus on renewable integration, hedging and clean flexibility.
Net-Zero Industry Act: Accelerates the deployment of essential clean technologies, including storage and demand response.
European Green Deal: Contributes to the EU’s overall climate objectives by driving clean electricity deployment at scale.
Conclusion
The Electron Bank represents a forward-thinking, market-driven approach to solving Europe’s industrial and clean energy challenges. By closing the price gap for firmed clean power, it delivers competitive, reliable electricity for industry while accelerating investment in the clean technologies crucial for Europe’s net-zero future. We encourage stakeholders to reach out to learn more and will be developing this concept further over the coming months to quantify the benefits of the electron bank mechanism.