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Renewable PPA prices continue to climb as supply tightens

Renewable PPA prices continue to climb as supply tightens

North America’s most competitive renewable power purchase agreement (PPA) prices rose by 5.9% from 2021 Q3 to 2021 Q4, according to the latest price index series from LevelTen Energy.

Prices are trending upward for the third consecutive quarter, according to LevelTen. The market average for solar PPA offers rose 5.7% to $34.25 per MWh, while wind was up 6.1% to $38.36 per MWh.

The LevelTen index series analyses thousands of wind and solar PPA pricing offers listed on its Energy Marketplace across 21 countries in Europe and North America. The firm looked at data on 265 price offers from 205 renewable energy projects across the United States.

The report found macroeconomic and regulatory challenges have been compounded by supply chain constraints, inflation, rising commodity costs and government auctions, resulting in reduced PPA supplies and rising prices.

The cost of development in North America may continue to increase in 2022, the report said, as inflation drives prices higher.

In Europe, renewable power purchase agreement (PPA) prices rose by 7.8% quarter over quarter, according to the index series.

The report found European renewable PPA prices rose 17.4% over the last nine months. Consequently, Europe’s P25 Index – an aggregation of the lowest 25% of wind and solar PPA offers – now stands at $60.14 (52,46€) per MWh, rising $4.33 (3.78€) from Q3.

The report said that high wholesale electricity prices have prompted developers to raise their PPA prices to make up the revenue they could have otherwise made selling a greater percentage of their electricity on the day-ahead market.

Despite headwinds, between 2020 and 2021, there was a 69% increase in annual contracted capacity in Europe, according to industry group data.

“The good news is that PPA deals are still getting done,” said Rob Collier, VP of Developer Solutions at LevelTen Energy. “Contract innovations tailored to current market conditions are enabling successful PPA transactions. And second, buyers have so far remained undeterred by market conditions, meaning that demand is still high.”

Download the full North American and European reports here.