North American Renewable PPA Prices Rose 5.3% in Q2 and Nearly 30% Year-Over-Year, Spurred by Specter of Solar Tariffs and Inflation, According to LevelTen Energy

July 13, 2022

LevelTen Energy’s newly released Power Purchase Agreement (PPA) Price Index reveals that North American P25* solar and wind PPA offer prices increased 5.3% to $41.92 per MWh in the second quarter of 2022. Year-over-year, prices have increased nearly 30%.

Seattle, WA – July 13, 2022 – In the second quarter, North American renewable energy buyers saw P25 solar and wind power purchase agreement prices rise another 5.3% to $41.92 per MWh, according to a new report from LevelTen Energy, the leading provider of renewable transaction infrastructure and operator of the world’s largest PPA marketplace. While wind prices increased a modest 2.5%, solar prices increased by more than 8%. Compared to last year, prices are now nearly 30% higher.

“PPA prices have now been rising for more than two years,” said Gia Clark, senior director of Developer Services at LevelTen Energy. “It’s unclear when prices will stabilize or decline because demand for PPAs continues to grow faster than supply. Supply won’t catch up until the roadblocks that renewable developers are facing are lifted, and that could take months or years. Potential solar tariffs and very real inflation are the latest obstacles making it harder and more expensive to build new projects and put PPAs out on the market.”

Commerce Department’s Investigation Stymies Supply of Solar Energy
No single issue looms greater in solar developers’ minds than the U.S. Commerce Department’s investigation into anti-dumping and countervailing duties (AD/CVD), which could lead to tariffs of up to 250% on solar components imported from four Southeast Asian countries, the source of 80% of U.S. supply. Amid industry uproar over this investigation and its wide-reaching impact, in June President Biden issued an executive order to place a two-year moratorium on solar tariffs, generating mixed reactions.

In LevelTen’s survey of 45 renewable energy developers, nearly one third of respondents (29%) said the decision will allow them to market and price new or more PPA offers for projects slated to become operational in 2023 and 2024. However, 40% said that it’s too soon to say how the moratorium will impact their business, and 31% said they still need assurance that the tariffs will not be retroactively applied after the two-year moratorium has passed.

North American PPA Market Highlights
LevelTen’s Q2 report, covering April to June 2022, shows PPA prices and trends in six U.S. Independent System Operator (ISO) markets, including CAISO, ERCOT, MISO, NYISO, PJM, and SPP, and one Canadian ISO, AESO. The report is based on actual PPA price offers uploaded onto the LevelTen Energy Marketplace from wind and solar project developers over the last quarter.

P25 solar prices rose across all ISOs during Q2 for the second consecutive quarter. “It’s not surprising to see solar prices jump more than 8% last quarter,” said Clark. “Developers aren’t raising prices to boost profits. They are just trying to cover the added cost and uncertainty that headwinds like interconnection delays and the AD/CVD investigation create.”
Inflation is driving up costs along renewable energy value and supply chains. LevelTen’s survey of 11 advisors (representing large energy buyers) and 51 energy sellers showed that approximately 50% said that “indexing PPA prices to commodities prices or other capital expenditures” is important to getting PPAs signed.
Southwest Power Pool (SPP) P25 wind prices increased more than 16%. “Wind prices in SPP have surged in recent quarters,” said Rob Collier, VP of Energy Marketplace at LevelTen Energy. “Though the market has significant wind potential, a lack of transmission capacity hinders wind generators’ ability to get their generation to market, causing significant negative wholesale market pricing events and production curtailments that developers may be accounting for in their PPA prices.”

What Do Buyers Need to Know about Procuring in this Market?
Today, procuring renewable energy requires more partnership between buyers and sellers to manage risk. According to LevelTen’s survey of developers, in this competitive market, buyers can maximize their chances of success by being open to: indexing PPA prices to changes in commodities prices, not penalizing extensions of commercial operation dates up to 6 months, and reopening price negotiations within 10-25% of the original price.

Furthermore, “It’s important to remember that a PPA’s price is not the same thing as its value,” said Mitchell Reay, senior manager of Operational Analytics, LevelTen Energy. “PPA prices have been rising in recent years, but so too have wholesale electricity prices. The value of a PPA rises and falls relative to the project’s local wholesale price. The projected capture price trends in our report are a great example of how PPA value is rising over time.”

Take a Deeper Dive Into the Data
To download the free executive summary of LevelTen Energy’s Q2 PPA Price Index, the industry’s only source of data from hundreds of real PPA price offers in North America and Europe, or to purchase the full reports, visit: www.leveltenenergy.com/ppa. The executive summary includes an average of the 25th percentile of PPA price offers of each market. The full report includes more detailed price data, in-depth articles and analysis from market experts, survey data, PPA signings, and more.

*P25 prices are an average of the 25th percentile of PPA price offers of each market. PPA prices in LevelTen’s report are price offers listed by developers on LevelTen’s Energy Marketplace, not transacted PPA prices.