North America Witnesses Rise in 2023 Solar PPA Prices, Europe Registers Downfall: Report

Hartek Power To Develop 75MW Solar Plant In Bihar's Jamui. Pexels.

LevelTen, an analyst in the energy market sector, has noted that prices of Power Purchase Agreements (PPAs) in North America have risen over the course of time while that in Europe has decreased with time. The analyst, LevelTen also added in its report that the increase in price across North America has varied as per the region.

The overall Q4 report also delved into growing energy demand from electrification of transportation to increasing power requirements from data centers across North America that would keep pressure on PPA prices. In the fourth quarter of 2023, the average price of a solar PPA signed in North America reached US$52.69/MWh, the highest on record, and it was the second consecutive quarter in which the average value exceeded US$50/MWh. The P25 report by LevelTen represents the 25th percent PPA prices.

While the sustained increase in prices could be of value for independent power producers, which are able to generate greater returns from their investments, there is considerable geographic variation in US PPA prices, stated the report. In 2023, the average price of a PPA signed under the authority of the New York Independent System Operator was almost double the price of PPA signed in Electric Reliability Council of Texas (ERCOT) and California Independent System Operator (CAISO) – markets with high power capacity.

The increase in PPA prices was just not limited to Q4 but also saw a significant rise throughout 2023. The prices rose by 3 percent in Q4, they saw an overall jump of 15 percent in 2023. However, this figure was less than the average price of wind PPAs signed in this quarter – US$60.11/MWh – and hybrid PPAs – US$56.40/MWh – both of which saw their average prices increase from the third quarter of 2023 to the fourth quarter. As compared to Q3 the prices in Q4 rose by 4 percent.

However, the prices in Europe have been tumbling down as solar PPA declined slightly, falling 3% between the third and fourth quarters of 2023 to €71.84 (US$77.24)/MWh.

This is the latest quarter in which the European solar PPA price has fallen, since peaking at €76.84 (US$82.61)/MWh in the final quarter of 2022, read the LevelTen report.

 The report also forecasted about the ‘relative stability’ of European PPA prices, with this figure falling by exactly €5 (US$5.38) from one year to the next, could be of benefit to investors and developers alike, as the market is becoming more stable. Last year, solar power purchase agreements plummeted for the first time in Europe in two years. A report by a Swiss consultancy firm Pexapark also showed the decrease in PPA prices with the Netherlands witnessing steep decline followed by Spain and Portugal.

The concerns regarding flaking prices are also associated with the fact that the vast majority of manufacturing capacity lies in China having the potential to create an imbalance in the solar supply chain.