Wind and solar power purchase agreement (PPA) prices have steadied in Europe in 2023, compared with 2023, according to LevelTen Energy.
LevelTen’s Q3 PPA Price Index report shows that in Q3 2023, LevelTen’s blended index of wind and solar 25th Percentile (P25) PPA prices increased a modest 2% across Europe and that overall, prices appear to be more stable in 2023, compared with 2022, which saw dramatic increases following the war in Ukraine.
Though gas prices’ return to “new normal” levels and a stabilising supply chain alleviated some upward price pressure in the first half of 2023, complex energy market dynamics in recent months across Central Europe pushed prices up in solar markets like France, Germany, and Poland.
A looming labour shortage is also stressing project finance models and has begun placing a premium on EPC costs for solar developers.
“This quarter’s 2% increase in P25 PPA prices represent a mild shift compared to the past few years, when it was common to see very sharp price jumps,” said Frederico Carita, Global Director, Developer Engagement, LevelTen Energy.
“Buyers should capitalise on this moment of pricing stability to meet their needs efficiently and confidently amid growing corporate demand for European PPAs,” Carita said.
Although half of the European markets covered in this report saw modest increases or even declines in solar prices, there were exceptions including France (11% increase), Germany (10%), Sweden (8%) and Poland (6%).
The relative uniformity in these trends can likely be attributed to price dynamics related to energy economics across Central Europe, particularly in light of reduced French nuclear output – an illustration of the close relationships between these countries’ wholesale electricity markets.
Germany is a market to watch, as government contract-for-difference schemes are decreasing in value due to strong competition among developers.
P25 wind prices in Spain saw the highest jump of any country on the Q3 Index.
As price cannibalisation and curtailments continue to dampen the economics of Spanish solar PPAs, buyers there are showing increased interest in wind contracts.
More than previous quarters, prices in Europe are impacted by a higher risk in revenues.
Not only price cannibalisation has been spreading further, reducing the value of the PPA, but also curtailments are becoming more frequent.
In some markets, like Poland, fast-growing renewable capacity has resulted in grid operators curtailing solar generation, or even temporarily disconnecting clean energy assets from the grid.