European renewable PPA prices continue remarkable rise
Image by LevelTen Energy.
July 14 (Renewables Now) - LevelTen Energy’s new report reveals that European P25 solar and wind PPA prices* increased 16% in the second quarter of 2022 to EUR 66.07 per MWh. Year-over-year, prices have increased a staggering 47%.
Despite higher PPA prices, PPA values remain attractive due to wholesale electricity prices that remain elevated. Offtakers should view these long-term energy contracts as an economically compelling option for obtaining high-impact renewable energy certificates (aka GO’s or EAC’s) and locking in electricity rates.
Madrid - 14th July 2022
In the second quarter, European renewable energy buyers saw power purchase (PPA) agreement prices soar 16% to EUR 66.07 per MWh, according to a new report from LevelTen Energy. Compared to last year, prices are now 47% higher, a staggering increase driven by the region’s complicated energy crisis and inflation.
“In the simplest terms, PPA prices have been rising for one year because supply cannot keep up with demand,” said Flemming Sorensen, VP of Europe at LevelTen Energy. “There isn’t a clear end in sight to this supply and demand imbalance because its underlying causes will take months or 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 rising cost of inputs and labour. Furthermore, developers now have more options to market and finance their existing projects outside of corporate PPAs, which also limits available supply.”
European PPA Market Highlights
LevelTen’s Q2 report, covering April to June 2022, shows PPA prices and trends in 13 countries across Europe, including: Denmark, Finland, France, Germany, Greece, Ireland, Italy, Lithuania, Netherlands, Poland, Spain, Sweden, and the UK. The report is based on actual PPA price offers uploaded onto the LevelTen Energy Marketplace from wind and solar project developers over the last quarter.
Market highlights include:
Poland, where P25 solar prices rose 36.2% to EUR 95 per MWh. Demand for renewable energy PPAs has spiked due to the cessation of natural gas imports from Russia. Supply is struggling to keep up because of burdensome permitting barriers and government auctions. “In Poland, developers can bid half of their project’s production into government auctions. Developers can do whatever they’d like with the remaining project volume not contracted through the auction — like enter into a PPA or sell into the wholesale market to capture elevated electricity prices,” said Frederico Carita, Senior Manager, Developer Services at LevelTen Energy. Since wholesale electricity prices remain high, many more developers are taking their projects to the wholesale market and forgoing PPAs altogether or raising prices.
Italy had the largest share of European PPA offers on LevelTen’s Energy Marketplace (more than 32%). Italian P25 solar PPA prices have soared 22% year-over-year but stayed flat quarter-over-quarter and currently sit at EUR 51.5 per MWh. In Italy, there are emerging questions around price cannibalisation in regions like Sicily, where solar production outpaces solar demand. This dynamic could lead to diminishing revenue for developers and uneconomical procurements for buyers.
Greece made it onto LevelTen’s European PPA Price Index for the first time since its creation in 2020. “While Greek solar offers represent solid values, both buyers and sellers there should be aware of how the Greek market differs from other European ones. Greece’s credit rating is not as strong as some other European nations, which negatively impacts the credit of companies operating there who may be looking to procure,” said Luis Lopez-Polín, Senior Manager of Business Development, Europe at LevelTen Energy.
Spanish PPA prices remained relatively stable at EUR 39.50 per MWh, bucking the trend of rising prices. "In Spain, an abundance of competition and high levels of irradiance make for good opportunities for buyers. Spain has shown more stability and better values compared to many of Europe’s other solar markets,” said Sorensen.
What Do Buyers Need to Know about Procuring in this Market?
“PPAs are still compelling because PPA value – the potential financial upside of a PPA contract – still remains attractive,” said Sorensen. “In the near term, wholesale energy prices are forecasted to stay elevated but that won’t be the case indefinitely. Buyers that want to maximise their chances of using a PPA as a financial hedge should act now, as projects with 2023 commercial operation dates are nearly all accounted for.”
Equally important is the environmental value that PPAs deliver. “Greenwashing is a big concern for many offtakers who are focused on hitting their renewable energy goals. PPAs provide the highest amount of benefit to the environment because they drive more renewable generation capacity. Corporations and other offtakers that enter into PPAs get to tell a powerful impact story,” said Sorensen.
Apart from higher PPA prices, LevelTen also reports important changes to the way that PPA contracts are getting negotiated. Its report includes a survey of energy buyers and sellers, of whom approximately 50% said that indexing PPA prices to commodities prices or other capital expenditures is important to getting PPAs signed.
Take a Deeper Dive Into the Data
To download the free executive summary of LevelTen Energy’s Q2 PPA Price Index visit: www.leveltenenergy.com/ppa. The executive summary includes an average of the 25th percentile of PPA price offers of each market. The full report includes more detailed price data, in-depth articles and analysis from market experts, survey data, PPA signings, and more.
*PPA prices in LevelTen’s report are price offers listed by developers on LevelTen’s Energy Marketplace, not transacted PPA prices.
LevelTen Energy provides software that enables faster, safer and more efficient transactions for the renewable energy industry, delivering the transaction infrastructure required to accelerate the clean energy economy. LevelTen’s platform provides renewable energy advisors, developers, large-scale buyers, and financiers with instant access to the full market of renewable energy projects, on two continents, combined with the automated analytics and technology to get better deals done, faster.