Top 5 Takeaways From Global Q2 Renewables Report

The latest Global Renewable Market Update for Q2 by Edison Energy has shed light on the changing dynamics of the renewable energy market in the United States (US) and European Union (EU). The report discussed the price transition of renewable energy Power Purchase Agreements (PPAs) in these two regions.

Following are the five top takeaways from the international report–

1. Solar PPA prices plunge in European countries 

The report claimed that solar PPA prices continued to drop in European Union (EU) countries. A comparison of five EU countries revealed that the sharpest decline in solar PPA prices was reported in Germany. According to the report, the EU PPA Index price, which represents a weighted average of all PPA prices across Europe, decreased by around 15 percent.

Although Germany reported the highest decline in solar PPA prices, Spain offered the lowest PPA prices. The report said that the solar PPA price in Spain decreased from €48/Mwh to €47/Mwh from Q1 to Q2. The report said there was a surge in the marketed projects in Q2, and more deals were signed during the period too.

“In Europe, the market continues to stabilize after a year of political and price uncertainty, with PPA transactions increasing and more projects becoming available to corporate buyers. Corporate interest has continued to grow, with current pricing and risk more palatable to buyers,” the report said. 

2. US median PPA price falls by 3%

The report claimed that the US median PPA prices fell by 3 percent in Q2. The report attributed this slump to the increase in project inventory. It, however, said that solar PPA prices have increased modestly. It also added that the wind energy PPA prices decreased during the period due to the rise of competitively priced projects. However, wind energy accounted for merely 14 percent of the total power projects in the country. 

“The US median PPA price – measured across ERCOT, MISO, PJM, and SPP – dropped to $59 in Q2. This was primarily driven by the 30% jump in ERCOT project inventory, where PPA prices are typically lower than in other markets. Solar PPA prices increased, though modestly, in all markets. Wind PPA prices fell in both ERCOT and SPP, with a sharp 20% drop in SPP, driven by a small sample size and the addition of several competitively priced projects since last quarter,” the report said.

It, however, added that renewable buyers are now in a better position in the US due to pro-renewable legislation like the US Inflation Reduction Act.

3. REC prices

The report also said that the US National Green-e REC prices have stabilized after dropping more than 20% at the start of Q2.

“National Green-e REC prices have stabilized after dropping more than 20% at the start of Q2. The downward shift in the market seen in April and May was driven in part by several bills under consideration by the Texas Legislature. Senate Bill 2014, which aimed to repeal the state. Renewable Portfolio Standard (RPS) and proposed to dissolve the REC tracking system, had the potential to be particularly impactful to the REC market,” the report said. 

It also added, “In Europe, 2024 vintage GOs began trading at a premium compared to the 2023 vintage, likely driven by changes to RE100 guidance that will go into effect that year.”

4. Carbon offsets prices remained suppressed throughout Q2

The report claimed that amid recent criticism of the voluntary carbon market and of corporations using offsets to make carbon neutrality claims, market pricing for carbon offsets has remained suppressed throughout Q2. 

“Market pricing for carbon offsets has remained suppressed throughout Q2. Some Reducing Emissions from Deforestation and Forest Degradation (REDD+) projects, which were criticized by The Guardian earlier this year, are trading at record-low levels ($4 – $8/ tonne for recent vintages). Prior to the Guardian article, REDD+ prices ranged from $13-$17/tonne. Despite these setbacks, developers remain optimistic due to expected growth in demand as 2025 and 2030 climate commitments inch closer,” the report said. 

5. US Inflation Reduction Act Aids In Demand

The report also said that the Inflation Reduction Act in the US aided in bringing more clarity on tax credits and aided in building more confidence for renewable buyers.

“Preliminary IRS guidance on the new clean energy tax structure included in the Inflation Reduction Act has brought increased certainty to the US renewables market. Project developers are beginning to receive more clarity on how to qualify for tax credits, enabling them to revise their assumptions on the cost to meet these requirements. This has given renewable buyers more confidence in PPA prices going forward,” the report said.

The report said that the ongoing market challenges persisted around availability of inputs, cost of products, and supply chain constraints. “However, the industry continues to adapt by leveraging new strategies to manage risk, including later-stage marketing of projects and more targeted and accelerated PPA transactions,” the report said.

 

The key market changes would seem to indicate a period of high demand for solar power in these markets, besides moderation of risk, as far as sudden price rises go. This has been captured in the form of high European inventories of solar modules, besides a building manufacturing capacity overhang in China and elsewhere. One might add that a very poor H1 in India for solar capacity additions also means that supply will not be an issue for now, despite supply chains still to stabilise fully from all the disruptions of the past two years.

The message once again we believe is for customers to hold back no longer, as current prices are as low as they will go, and move ahead with those solar installation plans now to make a difference to their own, and global targets. Predicting long term prices is a mugs game now, especially if expected manufacturing facilities pop up as planned around the key consuming markets in China, US, Europe and India. Disruptions  post 2025-26 we fear will be completely man made, in the form of policy interventions as governments in these markets move to protect their ‘nascent’ solar manufacturers from overseas competition, especially China.