Abundance of solar panels, combined with hopes of lower interest rates and oversupply of natural gas prompted solar PV developers in the North American market to offer lower power purchase agreement (PPA) prices during Q1/2024. LevelTen Energy says the 25th percentile (P25) solar PPA prices declined 1.5% sequentially to $51.93/MWh.
Analysts at the renewable energy transaction platform warn that this will be a short-lived phenomenon and the window of opportunity won't last forever. They make these statements in their latest quarterly report Q1 2024 PPA Price Index North America.
Analyst, Energy Modeling at LevelTen Energy, Sam Mumford explained, "Demand is increasing rapidly from AI and the electrification of everything, and more corporations are entering the PPA buyer pool as 2030 sustainability deadlines approach. Trade restrictions could impact pricing soon as President Biden's two-year tariff moratorium on PV components shipped from certain Southeast Asian countries ends in June."
He added that the heightened government scrutiny on the solar supply chain could increase costs for developers which may end up impacting PPA pricing.
During Q1/2024, the prices in the Texas (ERCOT) region dropped by 1.6%, while in California (CAISO) the drop was more defined with 12.7%.
Alberta (AESO) saw an increase in offer liquidity due to the government lifting the moratorium on renewable energy development greater than 1 MW. Here, P25 solar prices increased 7.2%, which can be attributed to significant regulatory uncertainty. Alberta has restricted agricultural land use for renewable energy development, which is likely to impact 6.3 GW solar and wind capacity, according to the Pembina Institute (see Alberta's New Renewable Energy Rules 'Patently Unfair').
In comparison, high development costs impacted wind PPA prices during the reporting quarter. According to LevelTen, these increased by 2.4% to $61.52/MWh (see North America Q4/2023 Solar PPA Prices Increase Sequentially).
"While prices are relatively stable this quarter, they remain high, and companies need options. Bundling PPAs and clean energy tax credits together is an emerging alternative for buyers that can make their procurements more financially sustainable," stated Mumford.
LevelTen says its prices are based on what the developers are offering for PPA contracts and not transacted PPA prices. In 2023, it says the marketplace facilitated 42 PPAs for 98 million MWh of clean electricity, a number likely to grow in 2024.
The complete LevelTen report can be purchased from its website.