Solar power purchase agreement (PPA) prices in North America have dropped for the first time since Q1 2020 thanks to the increase in incorporating benefits of the Inflation Reduction Act (IRA) and a stabilised solar supply chain.
According to PPA services company LevelTen Energy, the 25th percentile PPA prices in the second quarter of 2023 saw a modest decrease of 1% compared to Q1 2023, although the prices still increased by 25% year-on-year.
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The company said after nearly a year since the introduction of the IRA, developers were also more able to incorporate the benefits of the IRA into their business practices and strategies. Guidance from the US Internal Revenue Service (IRS) and Treasury Department increased considerably, providing greater clarity on energy community bonuses, domestic content requirements, and tax credit transferability provisions.
LevelTen Energy added that tax credit transferability, in particular, will significantly “broaden the playing field for tax investment in renewable energy projects, providing a substantial financial opportunity for corporations to leverage their federal tax burdens to support clean energy buildout”.
“This quarter’s price stabilisation after years of increasing prices makes now a good time to procure. It’s still a competitive environment, so buyers are most likely to succeed if they move quickly,” said Gia Clark, senior director of strategic accounts at LevelTen Energy.
Last year, the US government implemented the Uyghur Forced Labor Prevention Act (UFLPA) which greatly constrained PV imports, while the plan for added tariffs on solar imports from Southeast Asian producers also affected supply. LevelTen Energy said these importation bottlenecks had eased in recent quarters, contributing to the rise of solar installations.
As a result, a total of 12GW of PV modules were imported to the US in Q1 2023, but there were only 29GW of modules imported during 2022.
Although PPA prices remained stable in Q2, the Electric Reliability Council of Texas (ERCOT) was an exception as prices rose by 14% quarter-on-quarter. LevelTen Energy said the increase could be partially attributed to regulatory uncertainty brought by a series of proposals in Texas’ 88th legislative session, threatening to harm renewable development in multiple ways.