European solar PPA prices down on falling power, gas

Market: Electricity
19/04/23

European solar power purchase agreement (PPA) prices in the first quarter of 2023 fell by 4.7pc from the previous quarter as supply chain bottlenecks subsided and power and gas prices fell, according to a report published on Tuesday.

Solar PPA prices in Europe reached an average of €73.20/MWh in the first quarter of this year, down from an average of €76.84/MWh in the fourth quarter of 2022. The fall was a result of lower prices in the UK, Italy, Greece, Poland and the Netherlands, with Spain the only country bucking the trend as local prices rose, the latest quarterly report by renewable transaction infrastructure provider LevelTen Energy show.

In the UK, solar PPA prices declined to just under €100/MWh from slightly over €100/MWh in the fourth quarter, with prices in Greece and Italy falling to below €65/MWh and just above €70/MWh, respectively, from around €70/MWh and about €80/MWh. LevelTen Energy did not disclose exact prices for each country.

"Supply chain difficulties brought by the pandemic are abating as Asian manufacturers ramp up production and logistical challenges resolve as the gradual decline in inflation improved visibility into their capex costs and reduce pressure to factor these uncertainties into PPA prices," senior analyst Placido Ostos said.

"The drop in natural gas and wholesale electricity prices may [also] be adding pressure to developers to decrease their PPA prices in order to remain a competitive option for buyers," he added.

Dutch TTF gas prices averaged around €53/MWh in the first quarter of this year, down from €94.53/MWh in the previous quarter, while the German base-load day-ahead index averaged €115.82/MWh, compared with €192.85/MWh in the fourth quarter of 2022.

But in Spain solar PPA prices increased to around €50/MWh from just over €45/MWh, driven by increased competition in the market, LevelTen Energy said.

Prices of wind PPAs moved in an opposite direction, increasing by 35pc in the first quarter of 2023 to €106.06/MWh from slightly below €80/MWh in the third quarter of last year, driven by price increases in the UK, Sweden and France, although prices in Spain declined. The company did not publish wind PPA prices in the fourth quarter of last year.

"While wind PPA prices tend to be higher than those of solar PPAs, keen buyers understand the significant value wind project economics provide. Any time a technology floods the energy mix, it will have a major influence on that technology's price," LevelTen Energy noted.

In total around 5.2GW of PPA volume was contracted in the first quarter of 2023, up from 4.6GW in the previous quarter, according to the company. Data compiled by Argus indicate around 6.9GW of power plant capacity entered into PPAs in the first quarter of this year. See European Power Purchase Agreements.

By Makani Joinville

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