Seattle, WA – July 18, 2023 – North American P25* solar power purchase agreement (PPA) offer prices stabilized in the second quarter of 2023, according to a new report from LevelTen Energy, operator of the world’s largest PPA marketplace. In Q2, P25 solar PPA prices nationally saw a modest decrease of 1% over Q1 numbers and rose 25% year over year. LevelTen’s P25 wind index rose 13% since Q1 and 30% year over year.
After increasing for over three years, solar prices decreased by 1%
“While 1% is a small change, this is the first time since Q1 of 2020 that we’ve seen the market-averaged continental solar PPA price decrease,” said Gia Clark, senior director of strategic accounts at LevelTen Energy. “It’s a promising indication that conditions are starting to stabilize,” she said.
“Over the last few years, solar developers have been navigating challenges like inflation, supply chain complexities, rising interest rates, and regulatory uncertainty. While we certainly haven’t solved all of these issues, we’re making progress. Now, nearly a year into the Inflation Reduction Act, developers are also more able to incorporate benefits of the legislation into business practices and strategies. Thanks to these positive movements, we're starting to see some relief from skyrocketing price increases,” Clark said.
Increased mobility in the solar supply chain is also likely contributing to Q2’s solar PPA price trends. Wood Mackenzie and SEIA have reported that 12 gigawatts (GW) worth of PV modules crossed the border into the U.S. during Q1 2023 alone, compared to only 29 GW imported during all of 2022, which contributed to 6.1 GW of solar capacity additions.
Wind prices up 13% due to low supply
“Wind PPA prices across North America are on the rise,” said Clark. In Q2, the P25 price for wind increased 13% over Q1 numbers and 30% year over year. Wind developers are facing challenges bringing new projects to the market, while demand is holding steady, leading to higher prices.
“Wind projects typically have higher capacities and are less flexible in siting conditions than solar projects, making it more challenging to secure land control. Permits tend to take longer due to a more complex environmental review process. Additionally, we’re hearing from developers that interconnection studies are taking longer than ever, and when they do come back, interconnection costs are far higher than historical norms,” Clark explained.
According to Berkeley Lab, the typical duration from connection request to commercial operation increased from less than two years for projects built between 2000 and 2007 to nearly four years for those built between 2018 and 2022. “Interconnection is a huge factor impacting project timelines. The longer a project takes to build, the more it costs, leading developers to set their PPAs at a higher price,” Clark explained.
“As a result of permitting and interconnection issues, fewer wind projects are entering the market compared to solar. That said, there are several developments in the market that may eventually bring more supply; the first is offshore availability, thanks to recent offshore permitting reforms, and the second is the potential for development of projects co-located with solar, where a smaller number of turbines are built on solar sites.”
“Despite the lack of options in the market, demand for wind has held steady,” she said. “Repeat buyers are looking to wind to diversify their portfolio, and those with hourly matching targets rely on wind to generate clean electricity when solar can’t.”
In the first half of this year, LevelTen Energy tracked 11.9 gigawatts of clean energy capacity contracted via PPAs in North America, setting 2023 on track to beat the 22.5 gigawatts signed in 2022.
"There is a tidal wave of demand for clean energy on the horizon, not only from corporations, but also from utilities and retail electricity providers," Clark said. "The market share of electric vehicles continues to grow both for personal use and in fleet adoption, artificial intelligence is putting new demand on data centers, and green hydrogen producers will require carbon-free electricity at all hours. It will be increasingly difficult to find clean energy projects that have obtained interconnection approval. Corporations need to act now to secure PPAs that will help them reach their emissions reduction targets, before competition becomes even more fierce."
PPA pricing varies across ISOs, impacted by region-specific regulation
LevelTen’s report covers April through June of 2023 and shows PPA prices and trends in six North American Independent System Operator (ISO) markets including AESO, CAISO, ERCOT, MISO, PJM, and SPP. Report data is produced from PPA price offers uploaded to the LevelTen Energy Marketplace by renewable energy developers.
- P25 solar PPA prices remained nearly flat in all markets except ERCOT. “It is encouraging to see a calming in PPA prices compared to the radical increases of the past few years. However, it’s unlikely that price trends will fall significantly. Instead, incremental levelizing with occasional declines are more likely,” Clark said. “Every day, developers are gaining a better understanding of how the IRA’s tax credit bonuses can be incorporated into future projects’ finances — which will hopefully continue having positive price impacts for offtakers,” said Clark.
- Amid legislative uncertainty in ERCOT, solar PPA prices rose 14%, bucking the national trend. “Historically, ERCOT has been home to some of the lowest solar PPA prices in the country,” said Clark. “Regulatory threats during Texas’ 88th legislative session created an environment of profound uncertainty for developers, pushing up prices. While the worst proposals failed, this session made clear that the opponents to renewable energy have a strong influence in Texas.”
- Development challenges result in lower wind availability in PJM. “This quarter, LevelTen did not receive enough wind project data to report pricing for PJM. It’s the first time since LevelTen’s PPA Price Index debuted five years ago that the market has not appeared on our Wind Index,” said Clark. “Wind development in PJM has become challenging for a number of reasons, including local opposition, permitting hurdles in states like Ohio and Illinois, and PJM’s notoriously lengthy interconnection queue. We’ve heard these challenges have motivated some developers in PJM to change tack and move into solar development, leading to lower wind project availability.”
- Wind prices in MISO rose 24% amid interconnection delays. “This increase is likely due to the continued interconnection challenges in MISO,” said Clark. Research by Berkeley Lab has found interconnection costs in MISO have grown substantially over time, and the average interconnection costs have grown as the number of interconnection requests have escalated.
Price stabilization creates opportunity for buyers
“This quarter’s price stabilization after years of increasing prices make now a good time to procure,” Clark said. “It’s still a competitive environment, so buyers are most likely to succeed if they move quickly. LevelTen is committed to developing innovative ways for more clean energy deals to get done faster.”
In May, LevelTen launched PPA Auctions, which enables ready-to-transact buyers to quickly lock in PPAs with mature projects through an efficient auction process. By securing PPAs with projects that have completed key development milestones, energy buyers can reduce the risk of the project delays and continued price swings.
Download the free executive summary or full report
Learn more by visiting www.leveltenenergy.com/ppa to download the free executive summary or purchase the full report. LevelTen’s report helps renewable energy developers, buyers and financiers navigate the PPA market with data from real PPA price offers and expert insights. LevelTen also offers custom market reports and procurement optimization reports. Contact datasolutions@leveltenenergy.com to learn more.
*LevelTen’s P25 Price Index represents 25th percentile PPA prices. All PPA price data in LevelTen’s report are based on the prices that developers are offering for PPA contracts, not transacted PPA prices.
About LevelTen Energy
LevelTen Energy delivers the marketplaces, software, automated analytics, and expertise required to accelerate clean energy transactions. The LevelTen Platform is the world’s largest online hub for renewable energy buyers, sellers, advisors, asset owners and financiers. The Platform includes the LevelTen Energy Marketplace, which delivers access to thousands of power purchase agreement price offers spanning 28 countries in North America and Europe. It also includes the LevelTen Asset Marketplace, which brings together over 850 renewable energy project developers and owners, and delivers the online tools and expertise they need to buy, sell and finance assets in North America and Europe. Together, LevelTen and its partners share #OneGoal to accelerate the energy transition. Visit LevelTenEnergy.com to learn more.
