Report: North American PPA Prices Rose Throughout 2020

(Credit: Pixabay)

by | Jan 20, 2021

(Credit: Pixabay)

A new Q4 PPA Price Index report reveals that the pandemic had a small impact on power purchase agreement (PPA) prices, and a larger impact on development timelines.

According to the report issued by LevelTen, starting in Q1 2020, solar PPA offer prices began to rise in the US for the first time since LevelTen began reporting on PPA prices in Q2 2018, and that rise continued all year. Meanwhile, starting in Q2 2020, wind prices began a steeper increase than in previous quarters, ultimately surpassing solar prices by 5.3% in Q4. Year-over-year, the blended technology P25 Index of PPA offer prices rose 17.7%.  

It would be easy to jump to the conclusion that COVID-19 was the cause of rising wind and solar offer prices, but the report says it was only one of many factors. In this quarter’s survey of developers with projects on the LevelTen Marketplace, only 26% of respondents said they increased PPA prices to overcome financial challenges caused by COVID. “In addition to disruptions caused by COVID, grid connection delays and permitting challenges have created a bottleneck for projects in areas where demand is high, creating supply constraints that have put upward pressure on prices,” said Rob Collier, Vice President of Developer Relations, LevelTen Energy. “In addition, many of the most economically competitive projects have already contracted with offtakers, leaving higher-priced projects available in the market.”

The report notes that one clear effect COVID had was on renewable energy project timelines. In LevelTen’s developer survey, 59% of respondents said COVID delayed commercial operation dates, and 41% said it delayed PPA negotiations and executions. “Some deals took a little longer than anticipated: procurement and finance teams were understandably focused on other priorities when shutdowns began, but as the world adjusted to a new normal, renewable energy transactions picked back up,” said Collier. “We don’t expect the rising prices to soften demand in 2021, as boards of directors, investors, governments, employees and consumers will continue to push for sustainability commitments that will require all large energy consumers to turn toward renewables.”

The takeaway? LevelTen says organizations should not wait to act on their sustainability commitments. The research company anticipates that demand will outpace supply in 2021 and beyond, creating a seller’s market. If climate and right-to-operate risks weren’t already lighting fires under executive teams, the financial incentives for locking in the best projects now should be the catalyst for action.

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