The US and Europe recorded relatively modest increases in average PPP prices in the fourth quarter of 2022; 4% and 3% respectively. Constant policy changes in the United States slowed price growth, while European policies offered no less certainty amid inflation and energy market volatility.
According to Edison Energy's fourth-quarter renewable energy market report, a 4% increase in the United States compares favorably with a 17% price increase in the third quarter and an overall increase of 48% for the full year. 2022.
US PPA rates currently average $2/MWh higher than last quarter. According to Edison, the slowdown in price growth in the United States is mainly due to rising interest rates and supply chain problems, offset by the continued impact of the Inflation Reduction Act (IRA) and lower commodity prices .
Since the fourth quarter of 2021, North American copper, aluminum and steel prices have decreased by 15%, 10% and 64%, respectively. These products are critical to the construction of solar and wind farms, and while falling material prices have not yet translated into lower PPP prices, the slower pace of growth is promising, according to Edison's research.
The stabilizing effect of IRAs in providing security to PPA buyers and investors has also increased confidence in the PPA market and slowed the pace of price growth. Research firm Wood Mackenzie expects the IRA to boost US investment in renewable energy generation and distribution to $114 billion by 2031, signaling confidence in the US market.
The report was less bullish on price growth in Europe, although 3% was still modest. When the EU recently announced its Green Deal industrial plan, aimed at competing with the IRA, Edison said that the EU's cap on renewable revenues of €180/MW had shaken confidence in the EPA's market.
The exact impact of the restrictions on PPA owners, which will apply retroactively from this spring, is unclear. Earlier this month, PV Tech Premium spoke to Aurora Energy Research about the impact of the Dutch decision to lower the cap to €130/MW for PPA holders and the uncertainty surrounding the issue.
Germany has agreed to extend the limit until 2024, while the governments of Romania and Poland have yet to assess the impact of restrictions on power purchase agreements, although the European Commission is recommending exemptions for deals concluded before restrictions were announced .
Adding to this general uncertainty, high energy prices and supply chain problems have affected Europe and the United States respectively. The war in Ukraine has led to fluctuations in energy prices in Europe, which in turn have increased the demand for PPAs and therefore higher prices. A recent PV Tech Premium article looked at the impact of the energy crisis on European solar energy and power purchase agreements.
Supply chain constraints in the US worsened in the fourth quarter of last year, resulting in lower availability and higher prices of solar PV systems, which drove down PPA prices.
In some US markets, regional energy company PJM saw its PPP prices increase by 8%, largely due to backlogs at interconnectors that constrained supply. ERCOM and SPP recorded a price decline in the fourth quarter.
Edison said the most attractive European market for PPA items is Spain. Despite the latest government auction, which ended very badly, the country remains financially attractive for corporate purchase prices. Last November, PV Tech Premium discussed the discrepancy between government auctions and PPAs.
