Prices for European renewable power purchase agreements have soared by a “staggering” 47% over the last year, according to PPA marketplace operator LevelTen Energy.
LevelTen said Europe’s “complicated energy crisis and inflation” saw its P25 index of European wind and solar PPAs leap 16% to €66.07/MWh ($66.11/MWh) in the second quarter of 2022 alone.
“In the simplest terms, PPA prices have been rising for one year because supply cannot keep up with demand,” said Flemming Sørensen, VP of Europe at LevelTen Energy.
“There isn’t a clear end in sight to this supply and demand imbalance because its underlying causes will take months or years to resolve.
“Developers continue to struggle to build new solar and wind projects, which are sorely needed, due to tough permitting and interconnection challenges and rising cost of inputs and labour. Furthermore, developers now have more options to market and finance their existing projects outside of corporate PPAs, which also limits available supply.”
LevelTen’s latest Q2 market update revealed that PPA rates in Poland, for example, shot up 36.2% to €95/MWh as demand for green energy grew following the ending of Russian gas imports and developers explored other options such as sale on the wholesale market.
“PPAs are still compelling because PPA value – the potential financial upside of a PPA contract – still remains attractive,” said Sørensen.
“In the near term, wholesale energy prices are forecasted to stay elevated but that won’t be the case indefinitely. Buyers that want to maximise 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.”