European renewable energy PPA prices defined by stability in Q1 2021

Source: press release, 14 April 2021

illustration: LevelTen Energy
illustration: LevelTen Energy

European renewable power purchase agreement (PPA) prices showed remarkable stability, with the blended P25 – the most competitive 25th percentile wind and solar PPA offer prices – increasing just 0.1% quarter over quarter, according to LevelTen Energy’s Q1 2021 PPA Price Index. The Index series, created by LevelTen Energy, provider of renewable transaction infrastructure, analyses over 4,000 wind and solar pricing offers listed on the LevelTen Marketplace across 21 countries in Europe and North America.

According to the analysis:

  • European P25 solar prices increased by just 0.3%, and P25 wind prices dropped by 0.1% in Q1 2021.
  • Spain continues to be a red-hot solar market, with Spanish P25 solar prices falling by 2.6% in Q1, following a 5.2% drop in the previous quarter.
  • Only France and the UK saw notable changes to the P25 wind prices. In France, wind PPA prices dropped for a second straight quarter, decreasing by 5.5%, and in the UK, prices rose by 4.3% from last quarter.
  • Ireland made its debut on the Index with wind PPA prices averaging EUR 66/MWh.
  • While Italy and Spain retained the top spots in terms of percentage of offers on LevelTen’s European Marketplace, the UK surpassed Germany to take third place, becoming Europe’s third-largest market.
  • The importance of social and environmental justice is making its mark on the industry, with over two thirds of respondents to the developer survey saying their company is actively working to improve their practices.

Commenting on the Index, Flemming Sørensen, Vice President of Europe, LevelTen Energy says, “Pricing in mature wind markets are more or less flat quarter-on-quarter, and we continue to see Nordic markets offering the lowest wind PPA prices. We have seen new PPA offers in Europe from zero subsidy offshore wind, which is a trend that we expect to only gain momentum over time. The story for solar is similar with the Nordic countries continuing to offer some of the lowest solar prices in Europe. That said, the solar pipeline in Spain is enormous, making the market both deeper and more liquid than other markets in Europe, giving it a competitive edge.”

Speaking on the inclusion of Irish PPA price data in the Index for the first time, Sørensen says, “In Ireland, corporate PPAs should be an attractive alternative for developers as a route to market without the need for a government subsidy, for both onshore wind and solar. If this is possible in Denmark and Sweden, it is also possible in Ireland, but it will only happen when the gap between what corporates are willing to pay and what an auction award will pay has diminished. Increased transparency and visibility into actual financial implications of an auction award will help achieve that, and larger volumes will help get there quicker.”

Reviewing the Index, Kyle Harrison, Senior Associate, BloombergNEF comments, “Despite the low percentage of offers from developers, Poland is a European corporate PPA market on the up and up. Rising carbon prices from the EU Emissions Trading Scheme are boosting power prices and improving the cost-competitiveness of clean energy. Corporations announced over 200 MW of corporate PPAs in Poland in the first quarter of 2021.”

Environmental and social justice driving change
In addition to price data analysed by LevelTen for the Index, a survey of 77 project developers on the LevelTen Marketplace was also performed. The survey revealed that 68% said they were actively working to improve their organisational practices as they relate to environmental and social justice impacts and were doing so in response to increasing buyer demand for such measures.

Nearly two-thirds of respondents said they had been asked by buyers about hiring and training local workforces to build their projects, and more than half reported they had been asked to disclose the diversity statistics of their company and how their land use practices went above and beyond “business as usual”. Many developers had also been asked about human rights protections in their supply chain, whether or not the materials they used could be recycled down the road, and their organisational GHG emissions.

“We’re seeing a rapid rise in corporate offtakers incorporating environmental and social justice preferences – and even requirements – into their RFP processes. The majority of developers are beginning to rise to this challenge and looking into their internal practices, and those of their supply chain partners, to increase transparency and promote equity throughout various aspects of project development,” says Rob Collier, Vice President of Developer Relations, LevelTen Energy.

To download the full European report, including PPA prices by country, click here.