LevelTen: European solar PPA prices falls 27% as prices remain stable in North America

The European wind sector has also endured what LevelTen analysts called “a trying few years,” with the average price of a wind PPA signed in Europe falling by 29% quarter-on-quarter. The company notes that much of these falling prices stems from broader political uncertainty in Europe, with a number of elections held across the continent disrupting and introducing uncertainty to a number of markets.

“The EU Parliamentary elections in June saw the legislative body shift to the right,” wrote the company in its latest report. “This change, and the new coalitions that are likely to form as a result, may inhibit the passage of new EU climate proposals in the coming years. However, it is unlikely that important initiatives, like the Green Deal, will be in the crosshairs.

“This rightward shift in political power is also manifesting in national-level European political arenas, with a rise in right-wing politics posing threats to renewable energy policy in countries like France.”

Last week, France awarded just 180MW of new rooftop solar capacity in its latest tender, half the capacity offered in the previous auction, and raising questions about the future of solar in the country. Similarly, a ban on new agrivoltaics (agriPV) projects in Italy – which Ginevra Biadico, managing counsel at international law firm Dentons, told PV Tech Premium was “illogical” – has undermined new solar installations in southern Europe.

Stable growth in North America

In North America, meanwhile, average PPA prices continued to rise. In the first quarter of the year, such prices demonstrated “increased stability,” and the average price of a solar PPA in the region reached US$53.68/MWh. Such prices have been between US$50-60/MWh for four consecutive quarters now, and suggests that the lack of electoral change thus far in the US, which has not yet held its presidential election this year, has contributed to sustained stability in PPA prices.

Overall, renewable energy PPA prices remained much lower than their European counterparts, despite the collapse in European prices. In North America and Europe, the average price of a solar PPA reached US$53.68/MWh and US$68.35/MWh, respectively, while the average price of a wind PPA reached US$65.85/MWh and US$99.63/MWh.

The LevelTen report notes that investors and developers have embraced “innovative ways” to finalise deals, and keep PPA prices relatively stable, despite market pressures in the US, such as growing uncertainty over the ability of a number of foreign manufacturers to comply with the anti-dumping and countervailing duty (AD/CVD) legislation. These methods include tying aspects of PPA price to variable metrics, such as tariffs or interest rates, allowing the value of the PPA to shift in line with macro-economic conditions.

“More recently, this has been embodied by an uptick in the use of contractual elements that address an array of development risks, specifically through the employment of conditions precedent (CPs) and indexation in PPA contracts,” explain the LevelTen analysts. “CPs provide developers with contractual ‘offramps’ should unlikely but untenably adverse events occur during the development journey.”