The war in Ukraine is the latest crisis to rattle Europe’s renewable energy markets, sending power purchase agreement prices up 8,6% to reach 57€ per MWh, according to a new report from LevelTen Energy, the leading provider of renewable transaction infrastructure and operator of the world’s largest PPA marketplace. According to LevelTen’s Q1 PPA Price Index, which analyzes hundreds of solar and wind PPA price offers on its Energy Marketplace, European PPA prices have increased 27,5% year-over-year. These prices represent an average of the 25th percentile of PPA prices of each European market on LevelTen’s Energy Marketplace.
High natural gas prices, fueled by the conflict in Ukraine, are spiking wholesale electricity prices, which have already been rising for months due to the energy crisis that began in Europe last year. In response to volatile energy prices, demand for power purchase agreements is skyrocketing since these long-term renewable energy contracts can be used as effective tools to lock in electricity prices, in addition to their primary benefit: securing renewable energy. A LevelTen survey of leading sustainability advisory firms revealed that energy buyers remain committed to their renewable energy goals despite dynamic market conditions, with 55% saying that their clients – utility-scale renewable energy buyers – are sticking to their procurement timelines, and 20% are even accelerating their timelines.
Yet, voracious buyer appetite for PPAs is creating a rapidly growing imbalance between demand for renewables and supply from developers, who are struggling to build new solar and wind projects fast enough due to supply chain, interconnection and regulatory challenges. These headwinds are acute in multiple European markets, including:
- Italy, which has the largest share of European PPA offers on LevelTen’s Energy Marketplace (27%). The country’s onerous and lengthy permitting process has made it challenging for developers to build fast enough to keep up with the demand. Italian lawmakers changed environmental review procedures last year in a bid to streamline and speed up the process, but it will take time to see these changes reflected in the market. Italian P25 solar PPA prices have soared more than 23% year-over-year, and currently sit at 51.5€ per MWh.
- In Germany, permits for onshore wind projects can take around five years to secure, and there is limited land available for development. Recognizing the need to ease regulatory constraints, German lawmakers have taken steps to streamline the permitting process and set aside 2% of land for wind energy projects. Previous regulatory reforms helped catalyze Germany’s solar industry. German P25 solar PPA prices increased 25% year-over-year, and now rest at 60€ per MWh.
- In Spain, more than 73 GW of solar projects are in the pipeline to be constructed and connected to the grid, but only 18.6% have received environmental and construction authorization, according to Spanish Solar PV industry group UNEF. Spanish P25 solar prices increased 11,8% year-over-year, and now rest at 38€ per MWh.
Source: LevelTen Energy