Solar Module Oversupply Brings Down European PPA Prices

• LevelTen Energy's Q4/2023 PPA Price Index for Europe shows a 3% sequential increase in solar PPA prices 
• An oversupply of solar modules easing the supply chain is the primary reason for this decrease 
• Supply will further improve while prices drop down, but it is important for the sector to watch out for price cannibalization and curtailments 

LevelTen Energy's latest assessment of renewable energy power purchase agreement (PPA) prices in Europe during Q4/2023 shows a 3% average decline in P25 or 25th percentile for solar energy projects. Analysts attribute this decline to an improvement in supply chain issues, leading to oversupply of modules globally. 

In the report titled Q4 2023 PPA Price Index Europe, analysts share that the P25 Price Index or the 25th percentile PPA prices during the period dropped to €71.84/MWh for solar energy. For wind power, the 1% decline led to an average €98.92/MWh. 

In the previous quarter, there was a 2% increase in PPA prices for both wind and solar in the continent with solar at €74.06/MWh and wind at €99.82/MWh (see Time To Make The Most Of Solar PPA Price Stability In Europe). 

Surplus supply of solar panels is a trend that LevelTen analysts foresee as continuing in the coming years. This brings price relief for developers as they navigate through the high interest rate environment. 

The sequential decline in solar PPA prices was a significant 11%, thanks to an increase in the number of PPA offers. In Spain, the decline was 7%, in Portugal 6% and in Germany 5%. 

On the other hand, Italy reported a 6% quarterly increase in prices while the UK saw a 1% increase. 

However, as module prices continue to decline by a further 40% by 2028 as estimated by the International Energy Agency (IEA), LevelTen sees price cannibalization and curtailments in markets like Spain, a threat for developers going forward.  

"A high-rate environment places significant pressure on project revenue to meet developers' financing needs — revenue that often must be, at least partly, sourced from project offtakers via higher PPA prices," said Director, European Energy Analytics at LevelTen, Plácido Ostos. "If and when rates begin to drop, it should release some of this upward price pressure, though those impacts will take time to materialize." 

The complete report for the European market can be purchased from LevelTen's website.  

In North America, LevelTen saw solar PPA prices going up with high interest rates during the same reporting period (see North America Q4/2023 Solar PPA Prices Increase Sequentially).