LevelTen’s Q2 2021 PPA Price Index Shows Rising North American Wind and Solar Prices, While European Prices Continue Relative Stability
Today, LevelTen Energy released its Q2 2021 PPA Price Index Reports for North America and Europe, delivering the industry’s most comprehensive analysis of actual power purchase agreement (PPA) price offers across North America and Europe. Here are a few highlights from each report. To access the full reports for free, please complete the short forms below.
North American PPA Prices Continue Steady Rise, Motivating Buyers to Act Swiftly
The surge in demand for renewable energy from public and private entities, combined with rising development costs and structural barriers to entry for new projects, has continued to put upward pressure on PPA prices. LevelTen’s technology-blended PPA Price Index rose 4.3% from Q1 to Q2, and 14.4% year-over-year.
“Much like we’re seeing supply constraints in other areas of the economy, the most desirable wind and solar projects are going fast. The key takeaway for organizations with fast-approaching emissions reductions targets is to act now to capture high-value PPAs,” said Rob Collier, Vice President of Developer Services at LevelTen Energy. “As demand from public and private entities escalates, and barriers to project grid connection and permitting remain, delaying procurement will only result in less choice in the market.”
This quarter all eyes were on solar PPA prices, which have been rising steadily since the beginning of 2020. After reports surfaced of horrific human rights abuses in China’s Xinjiang province — which produces 45% of the world’s polysilicon supply, a critical component in solar modules — solar developers scrambled to source from new suppliers, adding to the already-rising polysilicon prices. Given these challenges, it was surprising to see that solar PPA prices only increased 0.3% quarter over quarter. For comparison, between Q4 2020 and Q1 2021, solar PPA prices rose 2.6%.
It’s possible we’ll see a more substantial increase next quarter as developers reassess their price offers; according to LevelTen’s Q2 Developer Survey, the majority of solar developers —73%— reported that they are increasing PPA prices to meet the rising cost of polysilicon and solar modules. The good news is that despite increasing PPA prices, the rate of project development will likely continue. Only 12% of developer respondents said they are delaying projects, and no respondents said they are planning fewer projects.
North American wind PPA offer prices have also maintained their upward trend, rising 19.1% year-over-year. The phase-out of Production Tax Credits and the rising cost of steel has certainly played a role, and this quarter, wind developers faced additional challenges. “February’s record winter storm Uri may well be having lasting impacts on the Midwest’s and Great Plains states’ wind markets. Wind developers throughout SPP, MISO, and ERCOT — all of which saw price increases during Q2 — may be raising prices to recalibrate their projects’ risk/return profiles in the wake of the storm, and to absorb some of the risks presented by anti-renewable legislative and administrative proposals currently under consideration in places like Texas,” said Collier.
To download the full North American report, including PPA prices by ISO and hub, fill out the form below.
Red-Hot Spanish Market Mirroring California’s Historical Solar Buildout
In Q2 2021, European renewable PPA prices held largely steady, continuing the trend we have seen for the previous two quarters. The Blended P25 Index for European offers on LevelTen’s Energy Marketplace increased 0.9% quarter over quarter, while P25 solar prices rose by 1.9%, and P25 wind prices decreased by a mere 0.02%. However, despite general price stability in Europe, there are several market-specific trends of note.
In Q2, Spain officially became the hottest renewable energy market in Europe, boasting the most competitive solar prices, dropping wind prices, and comprising more than one-third of total European project offers on LevelTen’s Energy Marketplace. However, the Spanish market’s rapid growth, paired with the precipitous drop in Spanish P25 solar prices, could be a double-edged sword.
“Buyers in the Spanish solar market are growing increasingly concerned over price cannibalization risks as Spanish solar buildout accelerates,” said Flemming Sørensen, Vice President of Europe at LevelTen Energy. “Because solar projects only produce during daytime hours, an increasing amount of solar generation also means more projects are competing for daytime electricity demand. In California, this same phenomenon, sometimes called ‘solar value deflation,’ has resulted in the state’s average wholesale price for solar falling 37% since 2014.”
Meanwhile, solar prices continued to rise in the UK and Denmark during Q2, driven in part by rising wholesale power prices in both countries. Danish P25 solar prices rose more than 14% in Q2 and have increased 30% year-over-year, while UK P25 wind prices have risen nearly 18% year-over-year.
To download the full European report, including PPA prices by country, fill out the form below.