European PPAs ‘remain attractive’ despite 47% year-over-year increase

Facebook
Twitter
LinkedIn
Reddit
Email
The price of solar PPA increased by €10 in Q2 and is now almost at €60/MWh, a 19.1% surge from the previous quarter. Image: Belectric.

European power purchase agreement (PPA) prices have surged by a “staggering” 47% year-on-year as the continent’s energy crisis persists with soaring inflation, LevelTen Energy has said.

But despite the increase, PPA prices “remain attractive” due to wholesale electricity prices continuing to be stubbornly high.

Having previously forecast for PPA prices to level off this year in Europe, Russia’s invasion of Ukraine have caused prices to soar with supply failing to keep up with demand, Flemming Sørensen, VP of Europe at LevelTen Energy said within the power pricing firm’s latest Price Index report.

As a result, Europe’s P25 Index – an aggregation of the lowest 25% of solar and wind PPA offers – now stands at €66.07/MWh (US$66.20/MWh), a 16% hike on Q2, an almost eight percentage point increase on the previous quarter when prices increased 8.1%.

Meanwhile, PPA pricing has also been swayed by drives from European government to accelerate the deployment of renewables, as well as the growing economics of merchant business models.

“With public and private sector renewable ambitions growing, developers have no shortage of options when it comes to selling their clean electricity,” said the report.

This is a trend seen in Poland, where P25 solar prices have reached €95/MWh – prices spiked 36.2% due to the cessation of natural gas imports from Russia – with developers taking their projects to the wholesale market as its electricity prices remain high, forgoing PPAs.

And there are ongoing concerns about the risk of price cannibalisation in renewables markets with solar production outpacing demand in some markets – most notably in Sicily – which could lead to “diminishing revenue for developers and uneconomical procurements for buyers”, the report has claimed.

Solar P25 prices in Europe from Q2 2020 up to Q2 2022. Source: LevelTen Energy.

The P25 Index for solar offers rose 19.1% to €59.43/MWh in Q2, nearly €10 higher from Q1 2022. Markets in Spain and Finland remained more stable, however, with P25 index prices for solar even falling slightly – by 2.6% – in the latter.

Issues impacting Europe’s PPA are set to persist for some time yet too, with Sørensen stating that there isn’t a “clear end in sight” as the root causes of the imbalance could take years to resolve.

Developers continue to struggle to build new solar and wind projects, which are sorely needed, due to tough permitting and interconnection challenges and the rising cost of inputs and labor,” added Sørensen.

Similar issues are being felt in the North American market – where solar projects in particular have been dogged by low availability of PV modules in the wake of the Department of Commerce’s AD/CVD circumvention enquiry – with PPA prices on the rise across the Atlantic as well.

PPA prices have continued to rise over the past two years, with P25 solar and wind PPAs reaching US$41.92/MWh in Q2 2022, a 5.3% increase from the previous quarter and more than 30% higher year-on-year.

Read Next

September 27, 2022
Greek developer Mytilineos has completed third-party engineering, procurement and construction (EPC) contracts on a backlog of solar PV projects in Chile, Uzbekistan and Spain.
September 26, 2022
Plenitude, a renewables subsidiary of oil major Eni, has partnered with IPP Infrastrutture to develop 1.5GW of solar PV and wind projects in Italy and Spain.
PV Tech Premium
September 23, 2022
Plans for a temporary revenue cap on solar PV assets across the European Union (EU) could dent investor confidence in renewables, experts have warned, amid concerns that individual member states may be able to set lower caps specific to different technologies.
September 22, 2022
EDP Renewables North America has started construction on a 240MW utility-scale solar PV project in Milam County, Texas.
September 22, 2022
Tech major Amazon has expanded its renewables portfolio globally with 71 new projects with a total capacity of 2.7GW.
September 21, 2022
Under the REPowerEU scenario to install 750GWdc of solar across the European Union by 2030, the bloc will require 1 million solar workers, double the numbers from 2021.

Subscribe to Newsletter

Upcoming Events

Upcoming Webinars
September 27, 2022
15:30 AEST (UTC +10)
Solar Media Events
October 4, 2022
New York, USA
On-Demand Webinars, Solar Media Events
October 11, 2022
Virtual event
Upcoming Webinars
October 18, 2022
10am (EDT) / 4pm (CEST)