For the first time in two years, European solar power purchase agreement (PPA) prices fell in the first quarter of 2023 compared to the fourth quarter of 2022.
After reaching a high of €76.84/MWh in the fourth quarter of 2022, prices fell slightly by 4.7% to €73.2/MWh ($80.1/MWh), with prices also falling in the first quarter of 2023.
However, prices are still 47% higher than in the first quarter of 2022 and 76% higher than in the first quarter of 2021, according to PPA services firm LevelTen Energy's P25 index.
Buyer demand for solar PPAs has continued to remain strong over the past two years as European companies commit to meeting sustainability goals and insulating themselves from high wholesale electricity prices.
"There are several reasons for this decline," said Placido Ostos, senior European energy analyst at LevelTen Energy. "A major driver is that supply chain woes from the pandemic are easing as manufacturers step up production and address logistical challenges. , the gradual decline in inflation was compensated by higher interest rates, providing developers with greater visibility into capital expenditure costs."
The data shows that Spain remains the only market where solar PPA prices have not fallen in the first quarter of 2023 and continues to be the most active solar PPA market in Europe. Prices rose 9.8% from the previous quarter and 32.2% year-on-year.
According to Ostos, this will remove upward pressure on prices in the second quarter of 2023 as Spain's Ministry of Ecological Transition (MITECO) approves nearly 25GW of solar capacity, most of which is expected to be connected to the grid in the next few years.
Demand for PPAs continues to be strong across Europe
In addition, the demand for obtaining PPAs in Europe remains strong, with nearly 5.2GW of corporate PPAs signed in the first quarter of 2023, an increase of 13.4% from the previous quarter. The European Commission's recent energy market reform proposal aims to facilitate long-term PPA access for small and medium-sized enterprises .
"Project developers would have an incentive to enter into PPAs with SMEs if the tender follows the Commission's guidelines so they can be more competitive in open tenders, which would open up the market for many companies that have historically struggled to participate in PPAs , because they don't have the credit, or don't need a lot of energy."
PPA offtake volumes are expected to grow over time as the Eastern European market continues to mature. Greece is one of the markets that people continue to pay attention to. In LevelTen's "Energy Market" survey, Greece's solar power PPA accounted for 17.9%, which is similar to Spain's level; and in terms of price, Greece's solar power price ranks second in the whole of Europe. second only to Spain. From PPA prices to policy updates: How Europe's energy crisis is affecting solar
Frederico Carita, Global Director of Developer Engagement at LevelTen, said: "The Greek PPA market is an exciting option for buyers looking to procure clean energy, especially with a recent regulation that gives priority to Projects with PPAs in the grid connection queue.”
The European vice president of LevelTen Energy previously said, “PPA prices have been rising for almost two years because supply cannot keep up with demand. Despite ongoing permitting and interconnection challenges and rising input and labor costs, developers continue to struggle to build much-needed new solar and wind projects.”