European PPA prices surge 8% amid deepening energy crisis


According to new analysis from LevelTen Energy, a provider of renewable transaction infrastructure, Europe’s ongoing energy crisis has led to increases in renewable power purchase agreement (PPA) prices, which climb 7.8% quarter over quarter.

The company’s Q4 2021 PPA price Index report indicates that supply chain restriction, inflation and rising commodity costs have aggravated macroeconomic and regulatory issues, including the energy crisis, resulting in decreased PPA supplies and increased prices.

As a result, Europe's P25 Index, which combines the lowest 25% of solar and wind PPA offers, now sits at 52.46 euros/MWh (US$60.16/MWh), up 7.8% from Q3, which witnessed an 8% increase in pricing over the previous quarter. The upward price pressure trend has been sustained for the third quarter in a row, with a 17.4% increase in P25 price offers over the last nine months.

In Q4, the P25 Index for solar offers increased by 7.2% to 47.97 euros/MWh, while the index for wind offers jumped by 8.2%t to 56.96 euros/MWh.

Manager Fred Carita of developer services, Europe, at LevelTen, said that high wholesale electricity prices make selling energy into wholesale electricity markets appealing for renewable producers.

According to the survey, steady solar prices in Italy over the previous years had come to an end in Q4, with the solar prices in the country rising by 20.9%. As stated LevelTen, developers in the country may be padding PPA pricing to account for greater uncertainty arising from regulatory and interconnection rights approval processes that aren't keeping up with the growing project backlog.

Solar PPA prices in Spain increased by 11.5% in Q4, as steps taken by the country's government to minimize windfall gains from renewable energy projects may lead to upward price pressure, the research indicated.

Rob Collier, LevelTen Energy's VP of developer solutions said: “The good news is that PPA deals are still being done. Successful PPA transactions are enabled by contract innovations matched to current market conditions. Besides, despite market difficulties, buyers have remained undaunted, implying that demand is high.”

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