Power purchase agreement (PPA) prices for renewable energy in Europe rallied 11.3% in the third quarter to more than EUR 73 euro per MWh, a YoY increase of 51%, according to LevelTen Energy, a PPA market platform operator.
Despite all the challenges on the paths to energy independence from Russia and carbon neutrality, demand for PPAs remains resilient and high as companies can use PPAs to stabilize their energy costs.
LevelTen Energy said its price subindex of solar power prices in 16 European countries in the market for PPAs grew 15.4% to EUR 68.57 per MWh in the third quarter, while wind P25 PPA prices increased by 8% to EUR 78.5 per MWh. However, the year-over-year increases are not that far apart: 53.3% against 49.1%.
The combined measure advanced 11.3% in the last reporting period and 51% on an annual scale, to EUR 73.54 per MWh. At the same time, the equivalent benchmark for mid- to long-term agreements in the United States rose 9.6% from July through September to USD 45.93 per MWh, which is 34% above the level from the preceding year.
Shrinking Russian gas supplies put upward pressure on prices, which were already on the rise due to escalating demand and development costs, according to LevelTen Energy.
Profound regulatory uncertainty for the renewables development community has made it increasingly difficult for developers to assess the long-term economics of PPAs, LevelTen warned.
Extremely high wholesale electricity prices continue to provide tempting non-PPA options for developers, the analysis showed. This significantly lowers the risks associated with selling into wholesale market with greater portions of their projects’ capacity.
Banks are increasingly comfortable financing projects on a merchant basis, as they are growing more accustomed to renewable economics and current wholesale conditions.
Such environment could reduce the supply of available PPAs for corporate offtakers as demand for PPAs continues to skyrocket, leading to further price increases.
“The challenge is that supply can’t keep up because of permitting and interconnection issues,” the firm’s Vice President for Europe Flemming Sørensen said.