LevelTen Energy’s Q4/2021 PPA Price Index

• LevelTen Energy's latest report sees corporate PPA prices increasing in North America and Europe with a tight supply
• In North America during Q4/2021, the blended P25 index for wind and solar went up 5.9% to $36.30 per MWh on quarterly basis
• In Europe, on the other hand, P25 index for solar went up 7.2% to now €47.97 per MWh and for wind it was an increase of 8.2% to now €56.96 per MWh
• Yet corporate PPAs continue to get signed as both buyers and sellers innovate PPA models to hedge make it a win-win for both and the environment

Even as renewable energy demand from both public and private sectors goes up, market dynamics including supply chain constraints and grid congestion ensure the supply is limited, leading to a hike in prices for power purchase agreements (PPA), says LevelTen Energy.

The online marketplace for renewable energy procurement in its Q4 2021 PPA Price Index Reports for North America and Europe counts rising commodities costs, regulatory uncertainty as the other reasons for this trend in North America. These factors combined with Europe's energy crisis, inflation, and government auctions are contributing factors for Europe seeing an upward pressure on PPA prices, say LevelTen Energy analysts.

Counting an average of the quarterly changes in each ISO as Market-Average P25 Indices, the report counts that for the North American market it increased consecutively for the 3^rd quarter in Q4/2021 with blended P25 index for wind and solar going up 5.9% to $36.30 per MWh.

For solar PPAs, the market-averaged P25 index offers increased 5.7% to $34.25 per MWh, and for wind the increase was a 6.1% to $38.36 per MWh.

Nonetheless, corporate thirst for clean energy remains unsatiated hence newer PPAs keep coming up despite the high prices, note the analysts. Interestingly, it is not the economic or regulatory requirement that is getting the corporates turn to renewable energy, as LevelTen Energy found out in its survey. It is the commitment of buyers to bring new projects onto the grid to be able to make a 'direct and measurable impact' that makes them secure PPAs.

Going forward, the analysts expect high commodity prices due to inflation continuing to push PPA prices higher in the initial few quarters of 2022.

In Europe, the blended European index in Q4/2021 (defined as the average of wind and solar PPA price offers in all countries) increased by 7.8% to €52.46 per MWh, with the P25 index for solar having gone up 7.2% to now €47.97 per MWh and for wind it was an increase of 8.2% to now €56.96 per MWh.

Here the trend is for developers to contract majority project generation capacity through PPAs and sell the remaining part to the wholesale market. Now with high wholesale electricity prices, they are now raising their PPA prices to make up for the lost revenue from the wholesale market.

Developers foregoing PPAs, instead building projects on their own, also leads to tight supply.

Yet, corporate PPAs here continue to thrive though in a non-standard way as developers work with buyers to innovate PPA conditions and solutions. In addition, there is change coming as buyers are likely to expand the ambit of their selection process for a renewable energy project to include conditions related to diversity inclusion, community benefits and practices that ensure minimal damage to the surrounding ecosystem.

The reports for both North American and European markets is available for free download on LevelTen Energy's website.