Dive Brief:
- Prices for North American solar power purchase agreements rose 5.4% during the third quarter of 2024 and 10.4% year-over-year, according to data from LevelTen Energy, which collects data from its PPA marketplace. Wind PPA prices remained flat in the third quarter, but have increased 14.1% year-over-year, according to LevelTen.
- Projections by energy software and consulting firm Ascend Analytics indicate the upward trend is likely to continue, with PPA prices potentially easing in the 2030s.
- Growing demand for clean energy paired with supply chain challenges and project delays have triggered shortages of viable PPAs, according to Ascend Analytics.
Dive Insight:
You probably aren't going to be buying $20-per-megawatt-hour PPAs any time soon, analysts from Ascend Analytics agreed during a Thursday panel discussion.
North America hasn't seen those kinds of PPA prices since early 2020, according to data from LevelTen Energy, which puts the typical solar PPA at $56.58/MWh, and wind at $65.63/MWh as of the third quarter of 2024.
“It goes without saying that the recent year or two has seen turmoil in PPA prices,” Brandon Mauch, managing director of operations and strategy at Ascend Analytics, said Thursday. “They have been elevated, and we are seeing some upward and downward drivers looking into the future. These drivers are expected to bring some calm, but in the near term we still see elevated prices.”
PPA prices may begin to stabilize toward the later half of this decade, but may not begin to decline again until 2030 or beyond, Mauch said.
It can be difficult to tease apart just how much of the increase on the solar side should be attributed to new tariffs imposed on imported solar cells, and how much to shortages of key materials and supplies, according to Mitchell Reay, director of operational analytics for LevelTen Energy. Equipment that has been in short supply in the past, such as batteries and transformers, are now more readily available, Rahm Orenstein, managing director of the Ascend Energy Exchange, said. But the industry is now seeing shortages of equipment such as breakers and switches, he said.
Meanwhile, the introduction of a new wave of tariffs on solar cells from China have prompted U.S. developers to stockpile inventory, which has likely also limited supplies, Reay said.
None of this seems to be having an impact on demand, Reay said — LevelTen continues to see new buyers enter the market, including companies looking to supply data centers, as well as other, increasingly smaller corporates looking to set and meet clean energy targets.
Data centers in particular seem concerned with speed and ease of access above all other factors, and have proven willing to pay high prices for renewable energy that already available, or can be built quickly. The recent Three Mile Island deal, for which Microsoft will pay two to three times above retail power rates, exemplifies this, Orenstein said.
But interconnection backlogs and supply chain challenges continue to cause project delays for renewable energy developers, according to Ascend Analytics. These delays, in turn, have created difficulty for would-be buyers of renewable energy who are coming up against deadlines for their clean energy goals — and their desperation has increased the price they are willing to pay for energy, according to Ascend Analytics.
That willingness to pay is likely to hit a limit at some point. Utility customers have already begun to express concern about their ability to procure clean energy PPAs in the face of competition from corporate buyers, and some utilities have begun to shift their buying strategies to emphasize efficiency, according to LevelTen. And analysts with Ascend Analytics said they were skeptical of some of the larger projections for electrical load growth, arguing that data center growth and electrification will only continue at this breakneck pace up to a certain price point.
