Accelerating affordable clean electrification: The case for tripartite agreements

Elevated electricity prices have become a structural constraint on Europe’s deep decarbonisation progress and industrial competitiveness. High electricity prices stem from high gas prices, network charges, and policy costs.¹ Without tackling this problem, European industry cannot simultaneously electrify and compete. Industrial investment in electrified clean energy solutions will stall, undermining Europe’s green and economic objectives.

In response, the EU’s Affordable Energy Action Plan² has proposed the concept of tripartite contracts, which could take the form of a tool to address specific market gaps through the creation of a state-backed contracting entity between supply and demand. Upstream, this intermediary presents an opportunity to secure long-term power supply, giving clean energy supply developers the revenue certainty necessary for investment. Downstream, it offers industrial consumers long-term fixed prices.

For low- to medium-heat processes (up to 500ºC), which together make up 50% of the total industrial heat demand,³ industrial electrification is technically ready. Mature technologies—like heat pumps and electric boilers—can serve as direct replacements for fossil fuels across chemicals, food, paper, and other sectors.⁴ To enable electrification, industrial consumers need long-term electricity cost certainty to de-risk investment and predict their operational costs. Meanwhile, clean electricity suppliers need long-term revenue certainty to finance new capacity to supply clean electrons. Yet, electricity markets, both volatile and relatively short-term, are failing to satisfy these conditions. Long-term contracts help reduce electricity prices, by enabling long-term price hedging and bypassing volatile spot market premiums. Power Purchase Agreements (PPAs), while increasing in popularity, remain fragmented and inaccessible to smaller customers, where limited in-house capacity to procure clean energy, credit barriers, and other factors exclude most mid-sized operators entirely. This brief explores the model’s potential to enable Europe’s electrified, decarbonised. industrial future and urges stakeholders to collaborate on scaling these agreements.

Potential benefits of tripartite agreements:

• For industrial consumers, tripartite contracts solve the cost certainty problem: Via PPAs, industries receive fixed electricity prices over 10-15 year periods. The platform creates a market for 24/7 clean energy by combining multiple technologies.
• Expands the pool of consumers who can hedge risks:The state backing eliminates counterparty credit risk for both clean generation and grid projects, as well as the risk of disruption of offtake by the industrial consumer.
• Addresses shaping costs: By pooling demand and supply, the entity could procure a portfolio of resources that address “shaping costs”—the expense of matching variable renewables to baseload demand. These tripartite contracts could offer marketplaces for shaping products and flexible capacity, helping address missing markets for hedging.⁵
• Tripartite contracts are market-shaping, not just market-clearing instruments: pooling supply and demand leverages larger markets to drive costs down. Procurement processes of the contracting entity  could be designed to reward portfolios that pool renewable generation with clean firm capacity, storage, and demand response to enable 24/7 clean power delivery. Competitive,  technology-neutral procurement ensures the lowest-cost clean energy mix, and develops broader voluntary markets over time, while enabling storage and flexibility to be increasingly integrated as parts of the clean energy solution.⁶

How the tripartite model works:

1. A (public) clean power contracting entity sits between generators and industrial consumers. Its role includes aggregating demand and supply for clean electricity, performing auction-based procurement of supply, and passing on clean electricity costs and attributes to customers. Backed by the public sector guarantor , the contracting entity provides creditworthiness and manages risks. This should not prevent bilateral private contracting between clean and flexible resources with consumers, including industrials.
2. Clean energy supply procurement: Upstream, the central entity facilitates procurement and/or directly procures clean power through long-term contracts, like Contracts for Difference (CfDs), to support the development and/or financing of low carbon energy and flexibility assets.
3. Hedging costs for consumers: Downstream, the central entity can facilitate or issue a range of short to long-term contracts (e.g. PPAs, forward products) to offer consumers possibilities to hedge against price hikes. These contracts can also be used to provide predictability on electricity sourcing costs and incentivise industrial decarbonisation investments.

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Figure 1. Illustration of the public central contracting entity contracting PPAs and forward products with downstream consumers

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Challenges to implementing a tripartite entity are not insignificant:

1. Role and Structure of the Entity: Implementing a tripartite contracting framework requires determining several key design features. The entity could take different forms, from a centralised matching platform to a direct investor and procurer. Determining the most efficient and competitive structure will take effort and collaboration of policymakers, financial institutions, and  stakeholders on the side of consumers and clean electricity suppliers.
2. Underlying Market Barriers to Electrification: Electricity taxation creates structural price distortions that disadvantage electrification relative to fossil fuels. Taxes on electricity represent similar proportional rates to those on natural gas, yet they result in 2–3 times higher absolute costs per kilowatt-hour,⁷and have increased more rapidly in recent years.⁸
3. Market Concerns and Responses: CfD designs that “overcrowd” other types of contracts—by insulating large volumes of generation from price signals and reducing the incentive for market participants to optimize dispatch or investment decisions—risk undermining the effective functioning of the market. This risks undermining the market’s capacity to foster contractual innovation, support bespoke arrangements, and sustain  competitive pressure and end-prices.
4. Managing Legal and Contractual Risks: Long-term contracts create counterparty risks that require explicit provisions on liability, consumer recourse, force majeure allocation, insurance requirements, and dispute resolution.
5. Granular Accounting and Supply-Demand Matching: Clean electricity cannot be physically traced once injected into the grid, so Energy Attribute Certificates such as guarantees of origin (GOs) are used to verify renewable sourcing. Current GO frameworks lack harmonisation across Europe⁹ and generally operate on annual accounting, which limits information for 24/7 hedging.

Conclusion

Tripartite contracting presents much potential to accelerate the clean electrification of European industry while leveraging pooled markets to ensure cost competitiveness. Building on successful practices in Member States like Spain,¹⁰ France,¹¹ and Italy¹², the European Commission is currently developing the two sectoral tripartite agreements for offshore wind and grids and storage, while exploring their potential extension to other sectors (biomethane, nuclear energy, and data center energy integration).¹³ While this examines how tripartite contracts can deliver affordable, reliable 24/7 clean electricity at scale, successfully scaling tripartite agreements across industrial sectors will require clear frameworks, Member State alignment, and coordinated action from policymakers, industry, and clean energy suppliers.¹⁴ These agreements can become an important tool to design and implement effective best practices for 24/7 clean electricity procurement and contracting—advancing both deep power sector decarbonization and affordable industrial electricity.

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Footnotes

1. Making electricity cheaper: RAP’s eight priority actions, 2025.
2. Industrial heat: an overlooked piece in the decarbonization puzzle. World Business Council for Sustainable Development, 2025. 
3. Compass Lexecon, Reviving Europe’s Industrial Power: How to boost competitiveness through energy p 22ff 
4. Action Plan for Affordable Energy 
5. Compass Lexecon, Accelerating the deployment of clean power technologies to reliably decarbonise Europe through enhanced planning and contracting mechanisms, 2025. p 66. Report commissioned by CATF. 
6. Compass Lexecon, Accelerating the deployment of clean power technologies to reliably decarbonise Europe through enhanced planning and contracting mechanisms, 2025. p 70. Report commissioned by CATF. 
7. Commission, E., et al., Study on energy prices and costs – Evaluating impacts on households and industry – 2024 edition. 2025: Publications Office of the European Union.  
8. Eurostat, Tax hikes hinder gas price drop, raise electricity costs. 2024: Eurostat.  
9. Not all European countries are part of the European Energy Certificate System (EECS) aiming to standardise national schemes. A number of countries only hold an observer status in the Association of Issuing Bodies (AIB) which set up the EECS, such as Poland, Romania, Moldavia, Bulgaria, Ukraine or the UK. Harmonisation of the certifications can help track clean energy production, particularly in a growingly interconnected European market. 
10. Compass Lexecon, Reviving Europe’s Industrial Power: How to boost competitiveness through energy. 2024 p 54. Analysis based on Spain’s Royal Decree 1106/2020; 2024 data from the European platform for corporate renewable energy sourcing. Note: Country-level contracted PPA capacity data is as of end of November 2024 and the figure shows countries with a PPA capacity of at least 1 GW. 
11. Compass Lexecon, Reviving Europe’s Industrial Power: How to boost competitiveness through energy. 2024, p 54. 
12. Compass Lexecon, Accelerating the deployment of clean power technologies to reliably decarbonise Europe through enhanced planning and contracting mechanisms, 2025. p 68. Report commissioned by CATF. 
13. Tripartite agreements for affordable energy for EU’s industry Information note from the European Commission , 14.10.2025. 
14. Compass Lexecon, Accelerating the deployment of clean power technologies to reliably decarbonise Europe through enhanced planning and contracting mechanisms, 2025. p 47. Report commissioned by CATF.