PPA prices soar

According to a new report by LevelTen Energy, the prices of PPAs have shot up across Europe in the last year. The report outlined that Europe's solar and wind PPA prices increased by 16% in the second quarter of 2022 to €66,07 per MWh. Compared with statistics from last year, prices have increased 47% as a result of the ongoing energy crisis and inflation.

Speaking about what the figures indicate, Flemming Sørensen, VP of Europe at LevelTen Energy, said: “In the simplest terms, PPA prices have been rising for one year because supply cannot keep up with demand.” He went on to say that there “isn’t a clear end in sight to this supply and demand imbalance” due to the underlying causes requiring “months or years to resolve.”

Sørensen added: “Developers continue to struggle to build new solar and wind projects, which are sorely needed, due to tough permitting and interconnection challenges and the rising cost of inputs and labor. Furthermore, developers now have more options to market and finance their existing projects outside of corporate PPAs, which also limits available supply.”

Discussing what buyers need to know about procuring in the market, Sørensen said that PPAs are “still compelling because PPA value – the potential financial upside of a PPA contract – still remains attractive” and that while wholesale energy prices are forecasted to “stay elevated," that won’t be the case “indefinitely.” He explained: “Buyers that want to maximize their chances of using a PPA as a financial hedge should act now, as projects with 2023 commercial operation dates are nearly all accounted for.”

Greenwashing was also highlighted as a “big concern” for many off-takers who are focused on “hitting their renewable energy goals.” Sørensen added: “PPAs provide the highest amount of benefit to the environment because they drive more renewable generation capacity. Corporations and other offtakers that enter into PPAs get to tell a powerful impact story.”