Solar, Wind PPA Prices Rose Nearly 30% Year-over-Year
By Christian Roselund
New research from Level10 Energy shows U.S. solar and wind PPA prices rising nearly 30% over the last year. Using price offers from its energy marketplace, Level10 Energy shows North American wind prices increased 13% in the second quarter of 2022 to $33.91 per megawatt-hour (MWh), with solar prices increasing more than 3% to $36.33/MWh. When compared to the previous year, Level10 Energy says that these prices are nearly 30% higher.
These are “P25” prices, meaning that they refer to the most competitive 25th percentile offer price. These prices are for a variety of start dates, with average contract lengths in the 10 – 15-year range and include the value of renewable energy credits (RECs).
Price increases were very different across grid operator service areas, with sharp increases over the past six months for solar in the Midcontinent System Operator, PJM Interconnection, and Southwest Power Pool (SPP) grids, which cover the U.S. East Coast, Midwest to the Rocky Mountains, and part of the South. Prices for solar contracts in these three regions are now $44/MWh and above. This is in sharp contrast to statewide grids in Texas and California, where prices did not change as much and are in the $32-$34/MWh range. For wind, prices have fallen sharply in PJM but rose in SPP. They show a very large range across grid operator, from a low of under $30/MWh in Texas to above $60/MWh in California.
Level10 cites several reasons for rising PPA prices, including “ongoing permitting difficulties, congested interconnection queues, a fractured supply chain, and powerful inflationary factors.” It also cites the impact of the anti-circumvention investigation against Southeast Asian solar products as creating “near-paralysis” in the solar industry during Q2 2022.
However, Level10 also notes that as renewable energy prices increase, so have wholesale electricity prices. The company observes that “the value of wind and solar PPAs remains high, even as their prices increase.”
Level10’s finding that some of the rising PPA prices reflect rising costs is echoed by global data by Bloomberg New Energy Finance (BloombergNEF), which found that the levelized cost of electricity (LCOE) from both new-build solar and onshore wind increased during Q2 2022. BloombergNEF reports the average LCOE from onshore wind increased 7% year-over-year to $46/MWh while solar rose 14% year-over-year to $45/MWh.
BloombergNEF cited rising cost of “materials, freight, fuel, and labor” for solar and wind LCOE increases. Regardless, both sources remain much lower cost than new-build gas-fired generation ($81/MWh) or coal-fired generation ($74/MWh).
Source: Q2 2022 PPA Price Index Executive Summary (Level10 Energy)
