- LevelTen Energy’s Q3/2023 report for solar and wind PPA prices shows a modest increase of 2% QoQ
- Analysts attribute it to stabilizing supply chain and Central Europe energy market dynamics
- They don’t see prices going down substantially in the next future as corporate demand grows in keeping with the EU’s RED targets
LevelTen Energy says this is the right time for European corporate buyers to seize the moment of current period of pricing stability and sign power purchase agreements (PPA) for solar and wind power projects. As demand grows, they should not expect prices to go down substantially in the coming quarters.
During Q3/2023, there was only a 2% increase in prices across the continent on LevelTen’s blended index of wind and solar 25th percentile (P25).
It pegs the modest increase, despite gas prices returning to ‘new normal levels’, primarily to the ‘complex energy market dynamics’ in Central Europe as Germany, France and Poland.
Overall, the prices are more stable in 2023 than in 2022 when the market was more volatile with the Russian invasion of Ukraine, LevelTen analysts state in the online marketplace’s latest report Q3 2023 PPA Price Index Europe.
“Buyers should capitalize on this moment of pricing stability to meet their needs efficiently and confidently amid growing corporate demand for European PPAs,” recommends LevelTen’s Global Director, Developer Engagement, Frederico Carita.
A stabilizing supply chain has also had its impact on price stability offsetting some price pressure reported in H1/2023. This was seen in almost half of the 18 European solar markets covered in the report where prices increased or decreased only modestly, with exceptions being some of the larger markets like France where prices shot up 11% during the reporting period.
Prices went up by 10% in Germany, 8% in Sweden and 6% in Poland. The report writers attribute the increase to a significant drop in nuclear power generation in France.
However, in the coming quarters, prices may not go down substantially as corporate demand is expected to grow with the European Union’s Renewable Energy Directive (RED) to raise the share of renewables to a minimum of 42.5% by 2030, and a maximum of 45% (see EU Adopts New Renewable Energy Directive).
At the same time, analysts point to the looming labor shortage putting stress on project finance models, and hence a premium on EPC costs for solar developers. Throw in interest rate hikes, and the cost pressures swell.
In the report, LevelTen advises corporates to invest in projects now. Analysts add, “To scoop up the best deals in the market before competition increases, buyers should work with their advisors to identify the projects that meet their needs, and transact with efficiency and confidence.”
The Q3 2023 PPA Price Index Europe report can be purchased from LevelTen Energy’s website.
LevelTen Energy’s North America PPA Price Index for the reporting quarter blamed the rise in prices across the board for the increase in solar PPA prices (see Rising Costs Impacting RE Developers In North America).