Europe’s energy crisis has led solar and wind power purchase agreement (PPA) prices in the third quarter to increase by more than 11% to over €73 per megawatt hour, according to LevelTen Energy.
European PPA prices are now 51% higher than the same period in 2021, LevelTen’s analysis found.
“Corporations can use PPAs to stabilise their energy costs, meet their emissions reduction targets, and demonstrate their commitment to sustainability and energy independence,” said Flemming Sørensen, VP, Europe, LevelTen Energy.
He said that LevelTen has run almost three times as many RfPs as last year on behalf of offtakers seeking PPA contracts.
“The challenge is that supply can’t keep up because of permitting and interconnection issues.
“And now, because of high wholesale electricity prices, developers have more options to finance their projects outside of PPAs, which further limits supply.”
LevelTen’s third quarter report, covering July to September 2022, shows PPA prices and trends from 16 countries across Europe, including Denmark, Finland, France, Germany, Greece, Hungary, Italy, Netherlands, Poland, Romania, Spain and the UK.
The report is based on PPA price offers uploaded onto the LevelTen Energy Marketplace from wind and solar project developers over the last quarter.
Solar PPA prices rose by 15.4% to €68.57 per MWh, while wind P25 PPA prices increased by 8% to €78.50 per MWh.
The renewable energy industry is paying close attention to the UK’s Review of Electricity Market Arrangements, which could have implications on project costs, locational risks for generators, the ability for generators to sell their full capacity to the market, and PPA settlements.
LevelTen examines these proposals and their potential impacts in the full Q3 report.
Spain, Greece and the UK had the highest supply of PPAs in Q3.
Solar accounted for most of that supply as onshore wind projects continue to combat widespread permitting challenges.
“EU initiatives to reform and accelerate the renewables permitting process should, over time, provide some relief,” said Sørensen.
More supply may also come from Eastern Europe, where Romania’s renewable energy sector is maturing rapidly.
Both the Greek and Italian solar markets continue to mature, leading to more PPA activity.
“We can see some of this in both markets this quarter, with Italian and Greek P25 solar prices rising by 28.2% and 32.1%, respectively,” said Gabriel Umana Gomez, Customer Success Manager, Europe, LevelTen Energy.
In September the EU passed a temporary measure to limit the revenue of inframarginal generators, which includes wind and solar generators, to €180 per MWh.
Most existing PPAs won’t be affected by this cap because revenue will be calculated after contract settlements take place.
More than half (58%) of European developers surveyed by LevelTen said that the revenue cap would only affect “a few projects,” while 21% said it would affect none.