European renewable PPA price offers jump 8% quarter over quarter

Source: press release, 14 October 2021

illustration: LevelTen Energy
illustration: LevelTen Energy

Europe’s most competitive renewable PPA price offers jumped 8% quarter over quarter as a result of Europe’s deepening energy crisis, LevelTen Energy’s Q3 2021 PPA Price Index reveals. The Index series, created by LevelTen Energy, the leading 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.

A confluence of factors, including skyrocketing electricity prices, the easing of COVID-19 lockdown restrictions and rising carbon prices has spiked demand for the construction of new renewable energy generation capacity. As a result, Europe’s P25 Index – an aggregation of the lowest 25% of wind and solar PPA offers – now stands at EUR 48.68 per MWh, rising EUR 3.59 from Q2.

While the Index revealed Europe’s P25 solar PPA prices rose 5.5% to EUR 44.73 per MWh, the larger increase came from wind, with P25 wind PPA prices up 10.3% to EUR 52.64 per MWh, partly due to substantial wind PPA price hikes in Germany and the UK (13.4% and 16.1% respectively). In both countries, increasing capex costs and supply chain constraints have added to the pressure being created by the European energy crisis.

Europe’s energy crunch is due to a myriad of issues and while it may be temporary, to avoid this crisis in the future, the answer is building more renewable energy capacity. However, what the results of this quarter’s Index communicate is that demand for renewable energy is far outstripping supply – creating a substantial rise in prices.

As the IEA’s Fatih Birol has urged, we must not let the energy crisis cloud decision making on scaling renewable energy. Instead, policymakers and industry need to work collaboratively to address the issues that are preventing Europe from reaching the scale and speed required to match the energy transition. This includes permitting and interconnection, access to market and customer data and access to capital.

Spain, Europe’s hottest market, is beginning to show signs of cooling off. After a long downward price trend, Spain’s solar PPA price offers have flattened, and wind offers rose by 2.9%. A decision by the government to address runaway electricity prices by reducing renewable energy generation revenue has rattled the Spanish renewable energy market with developers pausing investments to revisit the economic viability of future projects. That said, it still remains the Index’s largest market, accounting for 41.18% of Marketplace offers.

Although wholesale electricity prices also spiked in Italy, solar PPA prices in the country have remained flat. This may be partly due to the Italian government taking a subsidy approach to mitigating wholesale price increases, rather than limiting renewable revenues outright. Due in part to Italy’s onerous permitting processes, the country’s overall PPA offer market share has fallen substantially, from 31.3% at the beginning of the year to 10.7% in Q3.

Other notable results this quarter include Danish solar prices rising 12.2% in Q3, having risen 40.2% year on year. Sweden and Finland continue to be the cheapest market for wind PPAs this quarter with P25 PPA offer prices of EUR 29.40 and EUR 30 respectively, this, compared to the UK, which has Europe’s highest wind PPA offer prices at EUR 65.80.

Download the full European report, including PPA prices by country.