LevelTen: Solar PPA prices rise, volumes decrease and other findings from Q4 2021

PPA price rise

LevelTen Energy released its Q4 2021 PPA Price Index, which includes the latest wind and solar prices for North America on the world’s largest renewable PPA marketplace. The report also surveyed LevelTen’s partners and renewable energy developers showing that demand for renewable energy is still high as buyers and developers have adapted their approaches to transact under unique market conditions.

Below are key findings from the U.S.:

Market dynamics continue to drive up PPA prices: Wind and solar combined rose by 5.9% to $36.30 per MWh compared to Q3, and 15.7% YoY.

Headwinds such as supply chain constraints and rising commodities costs to regulatory uncertainty and congested interconnection queues persisted in Q4, driving price volatility.

PPA offer volumes have decreased in all markets except ERCOT. ERCOT is the most transactable solar market: its solar prices rose only $1.60 per MWh YoY and its total share of marketplace offers more than doubled from Q3 to Q4.

Non-standard PPA contract structures are more prevalent than ever. With the development risk of today’s PPA landscape, buyers and developers are exploring more nuanced contract structures that allocate risk and distribute potential upside more evenly to achieve transactional success.

Why does this matter? Upward pressure on PPA prices may persist in 2022 as inflation drives commodities prices higher, which may increase the cost of development. With less PPA supply and continued strong demand, buyers need to be decisive, move quickly, and be open to non-standard contract structures to find transactional success.

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