The rise in US PPA prices may be due to uncertainty around tax credits and tariffs implementation
Despite regulatory uncertainty, renewable energy sector presses forward
Buyers with solid PPA options encouraged to act quickly before further complexities arise
The solar prices determined in the power purchase agreements (PPA) have shown a growth trend in the US, registering a 3.3% increase in the last quarter of 2024, according to the latest LevelTen PPA Price Index Report. In the 3rd quarter of 2024 too, the North American PPA prices registered positive growth (see Q3 2024 Solar PPA Prices Up Across North America).
A PPA is a long-term contract between energy buyers - such as corporations and utilities -and energy suppliers, outlining pricing, energy delivery terms, and contract length. LevelTen Energy tracks PPA price trends and aggregates data from its marketplace to provide insights into market conditions.
One key metric in the report is P25 pricing, which represents the most competitive 25% of deals in the market. In simple terms, this means that the lowest-priced quarter of PPAs for solar energy averaged $50 per megawatt-hour (MWh), while the same segment for wind power settled at $49.75/MWh.
The report highlighted that concerns surrounding the outcome of the 2024 US presidential election have impacted investor confidence. Specifically, questions about potential changes to tariffs and the future of clean energy tax credits under the Inflation Reduction Act (IRA) have caused hesitation in the market. However, LevelTen emphasized that renewable energy remains an attractive business opportunity, regardless of political shifts.
The PPA market has grown accustomed to accounting for tariffs, either directly in pricing or through tailored contract terms. While new policies may emerge, the market seems to be highly adaptable, says the report.
Despite regulatory uncertainty, the renewable energy sector is pressing forward. Many projects are moving ahead as planned, with developers incorporating safeguards into contracts - such as price adjustments based on policy changes - to mitigate risks. There is also optimism around permit reform, which could help accelerate project approvals and bring more renewable energy projects online.
The report also pointed out that the demand for clean energy remains strong, fueled by increasing electrification and growing data center power needs. Developers are moving forward despite uncertainty, and buyers with solid PPA options are encouraged to act quickly before further complexities arise. As data center demands push the market toward larger buyers with the ability to procure at scale, smaller buyers should secure deals soon to avoid missing out.
You can access the full report here.