LevelTen Energy’s Q3 European PPA Price Index Report, which is now available for subscribers, shows a rise in power purchase agreement (PPA) prices for solar prices and a drop for wind this quarter.
Here are four key takeaways from this quarter’s report:
Solar PPA Prices Find Balance
Solar PPA prices across Europe have been declining steadily for several consecutive quarters as the energy sector found its footing following years of inflation and market volatility. Q3 2024, however, saw Market-Averaged Continental P25 Solar PPA prices rise for the first time in four quarters, with a modest 1,3% quarterly increase. Rising solar PPA prices in Italy and Hungary contributed to this upward trend. Q3 also marks the first time Irish solar made our Index.
Europe’s solar PPA market continues to expand, particularly in the continent’s central and eastern regions, where LevelTen is seeing an uptick in PV development momentum in countries like Romania, Bulgaria, Slovakia, and Hungary. Q3 also saw adequate solar offer supply in Ireland to produce an Irish P25 solar price for the first time. With data centre demand poised to explode in Ireland over the coming years, tech buyers will surely welcome new sources of renewable capacity to help run their power-hungry cloud operations. The International Energy Agency (IEA) reported earlier this year that it expects data centres to account for nearly one-third of all electricity consumption in Ireland by 2026.
Wind Prices Drop in Q3
On the heels of a challenging several years, Europe’s wind sector continues to stabilise. LevelTen’s Q3 PPA Price Index saw Market-Averaged Continental P25 Wind PPA Prices drop for a fourth-consecutive quarter, declining by 3,2% QOQ. On a year-over-year basis, Market-Averaged wind prices across the continent have declined by 11,1%.
While significantly improved from pandemic-era lows, Europe’s wind supply chain still faces challenges. Costs for turbines — which represent the lion’s share of wind development costs — remain high. And while permitting headwinds are beginning to abate in some countries, like Germany, they still remain a major challenge across most markets. Interconnection queues, too, present significant obstacles to bringing wind projects online — though the re-powering of legacy wind projects provides one avenue to circumvent these bottlenecks. Some developers are also relaying multi-year delays in turbine delivery that are pushing back some wind projects’ CODs.
Interest Rate Cuts Provide Some Relief
On 18 September, the European Central Bank lowered its deposit facility rate to 3.50% — marking its second interest-rate cut in just over four months. And while the Bank of England held off on another rate cut in September, markets are expecting a cut there in November. While rate cuts may come slowly, each one provides some further softening in the substantial financing pressure the renewable development community has felt amid the high-rate environment that has prevailed over the previous few years.
July saw a landslide victory for the UK’s liberal Labour party, ushering in a new government that is far more friendly to clean energy. The new government swiftly went to work lifting the “de facto ban” on new onshore wind in the UK, which has held back the wind sector there for years. The UK’s recent Contracts for Difference (CfD) auction round resulted in strong participation from developers, and the German government held its first oversubscribed wind auction since 2022 — indications of strong development appetite. However, these government contracts can absorb capacity that could have otherwise gone to corporate offtakers via PPAs.
PPA Counterparties Are Well Positioned To Succeed
Europe’s renewable PPA market continues to grow more robust and geographically diverse. As more PPA markets continue to emerge in the continent’s central and eastern regions and solar offers grow more prevalent in northern nations, the variety of offtake opportunities available to potential PPA buyers has perhaps never been greater.
Corporate sustainability commitments will continue to drive competition for contracts with mature projects that can provide strong economic outcomes and ensure procurement timelines are met. At the same time, significant demand growth from AI-driven data centre expansions expected across much of the continent, and the continued development of Europe’s renewable hydrogen sector, are poised to absorb substantial amounts of clean energy capacity in the coming years. With current market conditions relatively stable, buyers may be wise to enter the market soon to secure the deals they need to reach their pressing climate goals.
Subscribers of the PPA Price Index can log in to the LevelTen Platform to read the full report. Not a subscriber? Contact us today to get access.
