Report Shows 35% Anticipate PPA Price Decrease in 2020

(Image Credit: LevelTen Energy)

by | Oct 16, 2019

(Image Credit: LevelTen Energy)

Just over one-third of utility-scale renewable energy developers say they anticipate a power purchase agreement (PPA) price decrease in 2020, according to LevelTen Energy’s PPA Price Index for Q3 2019. Respondents noted that the largest impact on PPA prices will come from competition from other renewable energy projects (24%) and the expiration or phase down of federal tax credits (24%).

The report says that developers are seeing the largest opportunities for renewables growth in Electric Reliability Council of Texas (ERCOT) and Pennsylvania, Jersey, Maryland Power Pool (PJM).

“There’s early indication that developers may be concerned about increasing prices,” said Rob Collier, vice president of developer relations at LevelTen Energy.

The report notes that corporate demand, utility demand, and decreasing renewables costs are seen as the primary drivers of renewables growth. Specifically, 68% of respondents said corporate demand is the top driver.

Other highlights from the survey include:

  • Less than half (41%) of developers surveyed said they expect prices to remain about the same in 2020; a 5% drop from Q2. And 35% see prices as increasing (a 6% bump up from Q2), while 21% think prices will decrease (a 6% decrease from Q2).
  • “Federal/state policy” rose to second place (a 9% increase from Q2), with 12% of respondents saying it would impact prices the most in 2020.
  • Taking LevelTen’s Q1, Q2, and Q3 survey results in succession, the general sentiment appears to be that the industry is beginning to show some concern over the tax credit phaseout.

In its Q1 PPA Price Index, LevelTen asked developers if they expect the tax credit changes to decrease the number of projects in which they commence construction on in 2020, and 55% said “no,” while only 15% said “yes.” In Q3, 15% of respondents saw the expiration or phase down of federal tax credits as having the largest impact on their PPA prices, and 24% feel this will carry over into 2020.

Beyond tax credits, competition and policy, other factors that developers expect to impact prices include: “increased demand from corporate buyers” (9%), “changes to capacity markets and expected capacity revenue” (9%), “decreased EPC costs” (6%), and “increased risk exposure from new contract terms” (6%), among others.

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