Enel X: Expect Renewable PPA Prices To Rise After 2020

by | Jan 18, 2019

Enel X

Renewable energy power purchase agreement prices will rise after 2020, predicts a new energy markets report from Enel X North America. As states, utilities, and corporations seek to fulfill renewable goals, there will be increasing competition for projects while the pipeline decreases, the analysis says.

The new report, What to Expect from Energy Markets in 2019, was prepared by Enel X North America’s Intelligence and Analytics team. “As we move into 2019, it is critical for large energy users to understand not only how emerging developments in the energy markets might affect them, but also what they can do in response,” the authors say.

In addition to looking at natural gas and the regulatory landscape, the report has a section focused on corporate renewable energy goals. Last year was a record-breaking year for procurement, and 2019 will likely include a number of “blockbuster purchases,” from large corporations looking to fulfill renewable energy commitments, the authors note.

However, as demand for renewables ramps up, restrictions on supply could exacerbate PPA pricing for corporate customers, the report cautions. Two trends will likely increase prices of wind and solar generation, according to the Enel X analysts.

“First, two key tax benefits, both the Production Tax Credit (PTC) and the Investment Tax Credit (ITC), are being reduced and/or phased out,” the report says. “Secondly, the tariffs on imported solar cells and modules that the Trump Administration implemented through Section 201 in 2018 could further complicate the economics of renewable projects.”

While prices are set to go up, supply might not become constrained for another couple of years and developers will be looking to enter into offtake agreements as soon as they can in order to secure federal incentives, the analysts say.

“Corporate buyers have an opportunity to jump on projects at favorable rates in 2019 and 2020 to meet renewable goals and secure long-term hedges in energy costs. Generally, negotiation over PPA agreements takes months,” the report advises. “Therefore, if you are in the market for purchasing renewables or have sustainability commitments, we suggest starting your renewable procurement as soon as possible.”

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