Strong demand for European solar PPAs despite price rises

Facebook
Twitter
LinkedIn
Reddit
Email
An operational PV plant in Italy, where solar PPA prices increased 28% quarter-over-quarter, according to LevelTen. Image: NextEnergy Capital.

Demand for solar and wind power purchase agreements (PPAs) in Europe remains strong despite sustained price hikes, research from LevelTen Energy has revealed.

According to the firm’s P25 price index, European solar PPA prices in Q3 2022 reached €68.57/MWh (US$67.45/MWh), a 53.3% increase year-on-year.

This article requires Premium SubscriptionBasic (FREE) Subscription

Unlock unlimited access for 12 whole months of distinctive global analysis

Photovoltaics International is now included.

  • Regular insight and analysis of the industry’s biggest developments
  • In-depth interviews with the industry’s leading figures
  • Unlimited digital access to the PV Tech Power journal catalogue
  • Unlimited digital access to the Photovoltaics International journal catalogue
  • Access to more than 1,000 technical papers
  • Discounts on Solar Media’s portfolio of events, in-person and virtual

Or continue reading this article for free

A PPA marketplace operator, LevelTen’s P25 price index represents an average of the 25th percentile PPA price from each market.

With Europe hit by “eye-watering” wholesale electricity prices – north of €500/MWh in some markets –LevelTen said there has been a resulting boom in PPA demand as large energy consumers try to insulate themselves from high energy prices with long-term, fixed-price contracts.

“Corporations can use PPAs to stabilise their energy costs, meet their emissions reduction targets and demonstrate their commitment to sustainability and energy independence,” said Flemming Sørensen, VP, Europe, LevelTen Energy. “That’s why despite higher PPA prices, we’re still seeing strong demand for PPAs.

The challenge now is that PPA supply can’t keep up because of permitting and interconnection issues, Sørensen said, adding that because of high wholesale electricity prices, developers have more options to finance their projects outside of PPAs, further limiting supply.

The research reveals that the allure of high wholesale electricity prices continues to provide tempting non-PPA options for developers, while banks are increasingly comfortable financing projects on a merchant basis.

Compared with Q2 2022, LevelTen’s solar P25 index for Q3 rose 15.4%, driven in part by steep solar price surges in markets such as Germany, Greece, Hungary, Italy and the UK.

The report notes that while the Greek and Italian solar markets continue to mature, leading to more PPA activity, this can increase competition and apply upward price pressure.

“We can see some of this in both markets this quarter, with Italian and Greek P25 solar prices rising by 28.2% and 32.1%, respectively,” said Gabriel Umana Gomez, customer success manager, Europe, LevelTen Energy.

The research also explores the impact of the EU’s move to introduce a €180/MWh revenue cap on inframarginal electricity generators, such as PV plants.

Set to last from 1 December 2022 until 30 June 2023, the revenue cap “will have minimal impact” on most long-term PPAs, given that the vast majority of long-term PPA prices fall well under €180/MWh, according to LevelTen.

More than half (58%) of European renewables developers surveyed by LevelTen said that the revenue cap would only affect “a few projects”, while 21% said it would affect none.

However, the firm said the measure creates uncertainty given that EU member states will be allowed to set lower price caps and also determine whether they will apply the regulation when the settlement of the exchange of electricity takes place, or thereafter.

“We have seen this uncertainty cause some off-takers to pause on PPA activity until 2023, when hopefully more clarity emerges,” said Sørensen.

28 January 2025
London, UK
Returning in 2025 for its 12th edition, Solar Finance & Investment Europe Summit will bring together the brightest minds representing funds, banks, developers, utilities, government and industry across Europe and the UK on a programme that is solutions-focused from top to tail. The event is designed to enable leaders at the forefront of solar investment and deployment in Europe to scale, learn and land themselves industry defining partnerships.

Read Next

Premium
June 10, 2024
Grid bottlenecks have emerged as a significant obstacle standing in the way of the energy transition in the US.
June 10, 2024
Solar equipment provider Mondragon Assembly has secured a contract with Greek PV module manufacturer Brite Solar for the development of a 150MW semi-transparent agrivoltaics module line in Greece.
June 5, 2024
Spanish renewables firm Elawan Energy has established a joint venture to develop 2GW of solar PV projects in Italy.
Premium
June 4, 2024
Earlier this month the agriculture minister, Francesco Lollobrigida, announced a plan to "put an end to the wild installation of ground-mounted photovoltaics" on land classified as agricultural land.
May 29, 2024
US renewable developer Origis Energy has commissioned a 150MW solar-plus-storage project in the US state of Mississippi.
May 29, 2024
Responsibility for awarding permits for new renewable projects in Michigan will remain with the state’s Public Service Commission.

Subscribe to Newsletter

Upcoming Events

Solar Media Events
July 2, 2024
Athens, Greece
Solar Media Events
July 9, 2024
Sands Expo and Convention Centre, Singapore
Solar Media Events
September 24, 2024
Warsaw, Poland
Solar Media Events
September 24, 2024
Singapore, Asia