LevelTen Energy’s recently released Q2 2023 PPA Price Index report shows that solar prices began to stabilize — and decrease — for the first time since Q1 2020. One exception is with ERCOT, which experienced some uncertainty after series of proposals in the Texas legislature.
According to the report, North American P25 solar PPA offer prices stabilized in the second quarter of 2023. During this timeframe, P25 solar PPA prices nationally saw a modest decrease of 1% over Q1 numbers and rose 25% year over year. On the other hand, LevelTen’s P25 wind index rose 13% since Q1 and 30% year over year.
“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. “It’s a promising indication that conditions are starting to stabilize.”
Clark added that solar developers have been navigating challenges like inflation, supply chain complexities, rising interest rates and regulatory uncertainty over the last few years.
“While we certainly haven’t solved all of these issues, we’re making progress,” she said. “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.”
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.
In the first half of this year, LevelTen tracked 11.9 GW of clean energy capacity contracted via PPAs in North America, setting 2023 on track to beat the 22.5 GW 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.”
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.”
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 at http://www.leveltenenergy.com/ppa.
Note: 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.
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