Red-hot Spanish renewable PPA market bucks triggers price cannibalisation concerns

Source: press release, 20 July 2021

illustration: LevelTen Energy
illustration: LevelTen Energy

Spain has become the hottest renewable energy market in Europe, with plummeting solar and wind power purchase agreement (PPA) offer prices this quarter, according to LevelTen Energy’s Q2 2021 PPA Price Index. The Index series, created by LevelTen Energy, provider of renewable transaction infrastructure, analyses thousands of wind and solar PPA pricing offers listed on the LevelTen Energy Marketplace across 21 countries in Europe and North America to deliver insight into the market.

Spain, which now comprises more than one-third of total European project offers on the Marketplace, surpassed Italy for the top spot and saw P25 solar PPA prices fall 10.3% during Q2 to sit at EUR 30.50, Europe’s lowest. This follows falls in Q1 2021 of 2.6%, and a 5.2% dive in Q4 2020. Spanish P25 wind prices also dropped during Q2, decreasing by 6.2%.

However, experts caution that the Spanish market’s rapid growth, paired with the precipitous drop in Spanish P25 solar prices, could be a double-edged sword: “Buyers in the Spanish solar market are growing increasingly concerned over price cannibalisation risks as Spanish solar buildout accelerates,” says Flemming Sørensen, Vice President of Europe at LevelTen Energy.

Sørensen continues, “Because solar projects only produce during daytime hours, an increasing amount of solar generation also means more projects are competing for daytime electricity demand. In California, this same phenomenon, sometimes called ‘solar value deflation,’ has resulted in the state’s average wholesale price for solar falling 37% since 2014.”

Other notable changes this quarter saw solar prices continue to rise in the UK and Denmark, driven in part by rising wholesale power prices in both countries. Danish P25 solar prices rose more than 14% during Q2 and have increased 30% year over year, while UK P25 wind prices have risen nearly 18% year-on-year.

Conversely, blended Q2 2021 renewable PPA prices for Europe held largely steady, continuing the trend noted over the previous two quarters. The Blended P25 Index for European offers on LevelTen’s Energy Marketplace increased 0.9% quarter over quarter, while P25 solar prices rose by 1.9%, and P25 wind prices decreased by a mere 0.02%.