LevelTen Vitality’s newly launched Energy Buy Settlement (PPA) Value Index reveals that though North American P25* provide costs elevated by 2.7% to $47.19 per MWh within the fourth quarter of 2022, the worth of wind fell for the primary time in nearly two years.
Within the fourth quarter, North American P25* energy buy settlement (PPA) provide costs rose a median of two.7% to $47.19 per megawatt hour (MWh), in accordance with a brand new report from LevelTen Vitality , operator of the most important PPA market on the planet. LevelTen’s P25 Index contains costs for wind and photo voltaic long-term power contracts, that are starting to point out diverging traits. For the primary time in nearly two years, LevelTen’s P25 wind index dropped 1.9% to $48.71 per MWh, whereas the photo voltaic PPA value elevated one other 8.2% to $45.66 per MWh.
The Inflation Discount Act may stabilize wind power costs
“We’re hoping that falling wind costs imply they’re beginning to stabilize, due to elements just like the Inflation Discount Act,” stated Gia Clark, senior director of Developer Providers at LevelTen Vitality. “However photo voltaic PPA costs proceed to rise because of tight provide chain challenges. The Uyghur Pressured Labor Prevention Act (UFLPA), whereas an necessary human rights safety, has slowed module imports to a leak, affecting undertaking growth schedules and costs, and PPA Hopefully UFLPA’s compliance procedures will turn out to be extra environment friendly so we are able to see some aid for photo voltaic costs, too.”
North American PPA market highlights
The LevelTen report, which covers October to December 2022, reveals PPA costs and traits in seven US Unbiased System Operator (ISO) markets, together with CAISO, ERCOT, ISO-NE, MISO, NYISO, PJM, and SPP, and a Canadian ISO: AESO. The info within the report is generated from PPA value affords uploaded to the LevelTen Vitality Market by wind and photo voltaic undertaking builders.
Wind PPA costs fell at SPP, MISO and AESO, however rose at ERCOT and PJM. “The passage of the Inflation Discount Act within the US and a 30% renewable funding tax credit score in Canada final yr supplied welcome monetary tailwinds for wind builders,” stated Jason Tundermann, chief working officer of LevelTen Vitality. “That is the primary drop in LevelTen’s North American Wind Index in almost two years, and it is arduous to think about that these tax credit aren’t a contributing issue. Tax credit aren’t a panacea although, with some markets nonetheless displaying rising costs.Ongoing regulatory uncertainty at ERCOT and severely congested PJM interconnection queues probably contributed to cost will increase there.
PJM noticed the very best photo voltaic value improve. “It would take years to work by means of PJM’s present backlog of interconnection requests,” Clark stated. “And the builders who obtained their interconnection research informed us that the estimated price was larger than anticipated, which led to a better PPA value. One other facet impact is that the overflowing demand in PJM is spilling over into different ISOs, placing extra stress on markets like MISO.”
Regulatory adjustments will hold the market dynamic. The UFLPA has delayed growth and procurement for some builders and patrons, and created a basic surroundings of uncertainty for all, in accordance with LevelTen’s survey of its community. The total implementation of the IRA, reforms of the native interconnection queue, and different regulatory points will proceed to play a job not solely within the PPA value calculations, but in addition within the investor’s urge for food for undertaking growth in some areas of the nation.
Demand for PPAs stays excessive
Regardless of market challenges, clear power patrons stay dedicated to their sustainability targets and belief PPAs as an answer. By 2022, power patrons utilizing LevelTen’s Vitality Market will demand greater than 25 million MWh of fresh power, which is equal to greater than 2.3 million family electrical energy makes use of in a single yr. “PPA costs stay excessive however so do power prices,” Clark stated. “PPA patrons know and perceive that the monetary worth of a PPA contract lies within the distinction between the wholesale power value and the PPA value. We don’t anticipate demand to lower this yr although of market uncertainty.”
Obtain a free government abstract or full report
Study extra by visiting http://www.leveltenenergy.com/ppa to obtain a free government abstract or buy the complete report. The LevelTen report helps renewable power builders, patrons and financiers navigate the PPA market with information from actual PPA value affords and professional insights. LevelTen additionally affords customized market reviews and buying optimization reviews. Contact email@example.com to be taught extra.
*LevelTen’s P25 Value Index represents a median of the twenty fifth percentile of PPA costs from every market. All PPA value information within the LevelTen report is predicated on costs provided by builders for PPA contracts, not the transacted PPA costs.