US, Europe experience slowed solar PPA price increases, despite mixed forecast

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US, Europe experience slowed solar PPA price increases, despite mixed forecast

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The US and Europe saw relatively modest increases in the average prices of solar power purchase agreements (PPA) in Q4 2022, up by 4% and 3%, respectively.

Stabilising policy changes in the U.S. have slowed price rises, whilst European policies have offered less assurance in the face of inflation and the volatile energy market.

According to Edison Energy’s Q4 Renewables Market report, the 4% rise in the US is considerable when compared with the 17% price increase seen in Q3 and the 48% total increase over 2022.

Median PPA prices in the US are currently US$2/MWh higher than the previous quarter. The slower rate of price increase in the US is mainly ascribed to rising interest rates and supply chain issues being offset by the steadying influence of the Inflation Reduction Act (IRA) and falling raw material costs, Edison said. 

Since Q4 2021, copper, aluminium and North American steel prices have all decreased, by 15%, 10% and 64% respectively. These raw materials are key to the construction of solar and wind equipment, and whilst reduced material costs are yet to reflect a PPA price drop, the slowed rate of growth is promising, according to Edison’s research.

The stabilising effect of the IRA in offering security for PPA offtakers and investors has also strengthened confidence in the PPA market, slowing the rate of price increases.

The report was less confident about the price rise in Europe, though 3% is still moderate. Despite the recent introduction of the EU’s Green Deal Industrial Plan, which aims to compete with the IRA, the EU-wide €180/MW revenue cap on renewable generation has shaken confidence in the European PPA market, Edison said.

The most attractive European market for PPAs is Spain, Edison said. Despite a recent government auction ending very underwhelmingly, the country remains financially attractive for corporate PPAs.

The US and Europe saw relatively modest increases in the average prices of solar power purchase agreements (PPA) in Q4 2022, up by 4% and 3%, respectively.

Stabilising policy changes in the U.S. have slowed price rises, whilst European policies have offered less assurance in the face of inflation and the volatile energy market.

According to Edison Energy’s Q4 Renewables Market report, the 4% rise in the US is considerable when compared with the 17% price increase seen in Q3 and the 48% total increase over 2022.

Median PPA prices in the US are currently US$2/MWh higher than the previous quarter. The slower rate of price increase in the US is mainly ascribed to rising interest rates and supply chain issues being offset by the steadying influence of the Inflation Reduction Act (IRA) and falling raw material costs, Edison said. 

Since Q4 2021, copper, aluminium and North American steel prices have all decreased, by 15%, 10% and 64% respectively. These raw materials are key to the construction of solar and wind equipment, and whilst reduced material costs are yet to reflect a PPA price drop, the slowed rate of growth is promising, according to Edison’s research.

The stabilising effect of the IRA in offering security for PPA offtakers and investors has also strengthened confidence in the PPA market, slowing the rate of price increases.

The report was less confident about the price rise in Europe, though 3% is still moderate. Despite the recent introduction of the EU’s Green Deal Industrial Plan, which aims to compete with the IRA, the EU-wide €180/MW revenue cap on renewable generation has shaken confidence in the European PPA market, Edison said.

The most attractive European market for PPAs is Spain, Edison said. Despite a recent government auction ending very underwhelmingly, the country remains financially attractive for corporate PPAs.

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