Despite Market Challenges, Project Developers and Corporations Demonstrated Their Commitment to Advancing the Energy Transition
In 2023, clean energy project developers faced a variety of hurdles, including regulatory uncertainty stemming from EU energy market reforms and the United States’ Inflation Reduction Act, as well as rising interest rates that rapidly increased costs in this capital-intensive industry. In addition, although supply chain bottlenecks began to ease compared to 2022, the industry still grappled with long interconnection queues and permitting challenges that slowed development. According to LevelTen’s Q4 ’23 PPA Price Index report, market-averaged P25 PPA prices increased 20% in North America year over year. In Europe, market-averaged P25 solar PPA prices fell by 6% year over year but remain elevated. European wind PPA prices also remain high in the face of development challenges that, at one point, led to a lack of sufficient project volume to produce the European P25 wind index.
But here’s the good news: corporations continue to recognize the importance of clean energy to reach their long-term sustainability goals, and the demand for power purchase agreements (PPAs) remained strong. In 2023, LevelTen and our partners facilitated 42 power purchase agreements, for a record-breaking 98 million megawatt hours of clean electricity. To put that in perspective, that’s enough megawatt hours to power the entire state of Louisiana for a year!
The rising demand for clean energy drove an increase in the number of sustainability advisors and retail electricity providers who offer clean energy support for their clients. LevelTen’s network now includes 53 partners, who use the platform to source clean energy supply on behalf of their clients and customers.
Project Development and M&A Activity Remained Strong
Although developers were challenged by market dynamics in 2023, they remained committed to bringing new projects online to serve the demand. According to LevelTen's Energy Marketplace, there are over 1,200 clean energy projects – inclusive of solar, wind, hybrid, and standalone storage projects – currently available in 25 countries.
In addition to robust PPA activity, M&A activity on the LevelTen Platform remained strong, as developers looked to divest assets or acquire new projects that would complement their portfolio. In 2023, the LevelTen Asset Marketplace closed 8 M&A deals, exchanging 19 renewable energy assets. In total, buyers and sellers exchanged over 1.2 GW of clean energy capacity. That’s just enough power to push Doc Brown’s Delorean back to the future, or power one million LED light bulbs.
Innovations for New Market Challenges
Over the past two years, the rapid rise in PPA prices meant that many clean energy buyers and sellers struggled to reach a deal. In many cases, developers needed to increase the price they originally offered to a buyer, because at the original price their project would no longer be financially viable. The longer deals took in this environment, the higher the chance a renegotiation would need to take place. That’s why LevelTen developed three new solutions that accelerate contracting timelines, increasing the chance of deal success:
- LEAP: In September we announced LEAP, LevelTen Energy’s Accelerated Process, a new, faster way to enter into PPAs that was developed in collaboration with Google. By starting with a standard contract that reflects current market dynamics, and bringing the RFP and PPA negotiation process into one online experience, LEAP reduces the time it takes to secure a PPA by 80%.
- PPA Auctions: Through LevelTen’s PPA Auction process, large clean energy buyers can quickly secure PPAs with highly desirable projects in the market, including advanced-stage projects with interconnection rights, reducing uncertainty around project completion or price increases.
- Project Spotlights: LevelTen supports bilateral deals — meaning a direct connection between a buyer and seller — by connecting potential clean energy buyers with projects available on the LevelTen Platform.
Looking Ahead: LevelTen’s Granular Certificate Trading Platform Supports Evolution of the Industry
In December, LevelTen announced the Granular Certificate (GC) Trading Alliance, a collaboration with AES, Constellation, Google, and Microsoft to develop a first-of-its-kind trading and management platform for “granular certificates” (GCs), a type of energy attribute certificate that verifies the time and location that carbon-free energy (CFE) is generated. This new solution, under development in partnership with the Intercontinental Exchange (ICE), aims to enable energy buyers to easily source CFE generated around the clock, and to incentivize energy sellers to produce clean energy where and when it is most needed, delivering carbon-free grid reliability in all hours. In addition to supporting LevelTen’s development of transaction infrastructure for GCs, Alliance members intend to be among the first group of users when the solution launches.
On the Energy Gang Podcast this January, Amy Myers Jaffe of NYU’s Energy, Climate Justice and Sustainability Lab included the GC trading platform as one of the “people, places and technologies to watch” in 2024, saying, “If it succeeds, it could be game-changing; if it doesn’t succeed, then we have a big problem in the United States.”
Looking Ahead to 2024
Heading into 2024 and beyond, the demand for clean energy is only expected to rise, as artificial intelligence puts new demands on data centers, and the desire to electrify everything places new demands on the grid. Fortunately, the Inflation Reduction Act, as well as many new regulations in Europe, are poised to support clean energy development. LevelTen is looking forward to working with our global network of carbon-free energy buyers, sellers, advisors and financiers to deliver new solutions that accelerate the transactions that underpin the energy transition. Want to join our network? Contact info@leveltenenergy.com.
