Solar Energy Prices Soar 60% In Europe As Wind Availability Dropped in Q4

A new report from LevelTen Energy has revealed that high development costs and an unstable regulatory environment has caused an 11,4% jump in European solar PPA prices in the fourth quarter of 2022. The report also mentions that solar PPA prices reached €76.84 per MWh, representing a 60% year-over-year increase.

LevelTen Energy is a renewable energy platform and operator of the world’s largest PPA marketplace.

Meanwhile, wind PPA contract availability plummeted as developers continued struggling to secure project siting and construction permits. Although the LevelTen Energy Marketplace had wind PPAs on offer in six European markets, there was insufficient volume to produce a P25 Wind Index figure using LevelTen’s market-averaged methodology. The wind prices ranged between €66 and €69 per MWh.

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European PPA Market Highlights

The fourth quarter report by LevelTen Energy, covering October to December 2022, includes analysis of 125 PPA price offers on 94 projects in 16 countries. LevelTen said that all PPA price data in the report is based on the prices that developers are offering for PPA contracts, not transacted PPA prices.

Solar PPA prices skyrocketed, driven by economic, supply-chain, and regulatory challenges: Solar PPA prices increased 30% in the UK and 20% in Italy which is the highest increases in Q4. Frederico Carita, Senior Manager at LevelTen Energy, said, “More capacity going to government auctions means less is available for corporate buyers, leading to higher PPA prices.”

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No permits, no wind contracts: Carita said that the wind projects made up only 12% of all European offers on the LevelTen Energy Marketplace in the fourth quarter. A lack of available land and years-long lead times for turbine deliveries are straining wind project economics — particularly in mature markets with high competition. The market desperately needs permitting reforms to kick in faster. In 2022, wind investments decreased by 47% according to industry group WindEurope.

Emerging European markets saw growing solar supply: The LevelTen Energy report held that an increasing number of renewable energy developers are seeking to build projects in emerging markets, presenting unique opportunities to buyers. “PPA buyers looking to avoid hypercompetitive markets should consider markets like Greece and Hungary, which together produced an impressive 21% of Q4 solar offer volume,” said Carita.

Regulatory uncertainty contributed to PPA scarcity: Kristian Lande, senior director of European analytics says,“From price caps on renewable generators to a cap on gas prices, policymakers are growing more dependent on installing guardrails to keep wholesale prices artificially low — often at the expense of generators.”

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PPAs Offer Stability In Uncertain Times

Flemming Sørensen, vice president of Europe, held that though the current market environment is uncertain, working with experienced procurement advisors can ensure buyers enter into the PPAs that meet their needs and contribute to Europe’s energy security and independence.

“Corporate buyers who can move with speed and efficiency will continue to enter into highly desirable renewable PPAs: providing them with increased protection from Europe’s volatile energy markets while securing the GOs they need to reach their sustainability goals,” added Sørensen.