LevelTen Energy’s European solar and wind PPA tariff assessment for Q2/2024 shows a continued decline
Highly competitive market solicitations by major buyers and ample supply are contributing factors
The rise of right-wing ideology in political circles in the EU, like in France, may threaten the passage of new EU climate proposals in the coming years
The P25 solar power purchase agreement (PPA) prices in Europe declined by 27% during Q2/2024, according to LevelTen Energy’s Continental European PPA Price Index. On its Market-Averaged Index, it dropped by 7% quarter-over-quarter (QoQ).
For solar energy, on the Market-Averaged Continental Index, the PPA price came down from €67.63/MWh in Q1 to €62.83/MWh in the reporting quarter (see European Solar PPA Prices Decline 5.9 Percent Sequentially).
For wind energy as well, competitive offers brought down prices by 29% from €94.63/MWh in the previous quarter to €91.59/MWh.
LevelTen analysts believe this shows signs of stabilization following years of volatility in the European electricity markets. In case of solar energy, the biggest driving factor was a large number of highly competitive market solicitations run by major buyers through the LevelTen platform.
“Q2’s price drop also reflects updated forward curves that show a far more moderate outlook for wholesale electricity prices in Europe, bolstered by healthy natural gas stockpiles. More and more European markets are seeing growing renewable penetration creating an issue of more low- and negative-priced hours,” explain the analysts.
These low spot prices add challenges for developers, who need sustainable revenue streams to secure project financing. Hence, they may be adjusting PPA prices to reflect these evolving market conditions.
There is ample supply of renewable energy projects in Europe which also contributes to low power prices.
While the good news is that the European Central Bank (ECB) lowered its benchmark interest rates for the 1st time in years on June 6, 2024, and more such cuts are expected within this year, developers should see their financial pressures ease. This should lead to a lowering of PPA prices as well.
Nonetheless, in a potential threat to renewable energy policy in countries like France, the rise of right-wing political parties may inhibit the passage of new EU climate proposals in the coming years, analysts caution.
A free preview of LevelTen’s Q2 2024 European PPA Price Index is available on its website.