Stable solar power purchase agreement prices present “window of opportunity”

Power purchase agreement (PPA) marketplace provider LevelTen Energy released a pricing report for Q1, 2024, noting increased price stability following years of energy market volatility.

LevelTen reports its data based on P25 pricing, or the 25th percentile of all PPA prices. P25 prices for solar declined by 1.5% over the quarter, while P25 wind prices increased 2.4%.

Lower natural gas prices from a mild winter and abundant supply of solar modules, combined with market hopes for lower interest rates, have allowed developers to offer lower prices in the quarter, said the report. However, LevelTen does not expect this window of opportunity to last indefinitely, as demand from economy-wide electrification and datacenter demand continues to ramp up.

“More corporations are entering the PPA buyer pool as 2030 sustainability deadlines approach,” said Sam Mumford, energy modeling analyst, LevelTen Energy. “Trade restrictions could impact pricing soon as President Biden’s two-year tariff moratorium on PV components shipped from certain Southeast Asian countries ends in June. Heightened government scrutiny on the solar supply chain could increase costs for developers — with the potential for PPA pricing impacts.”

LevelTen noted P25 solar prices in Texas, the largest market for utility-scale solar, declined in the quarter by 1.6%. The company said it continues to see positive pricing trends for the market, with consistent levels of high-value offers paired with favorable future capture prices. 

California P25 prices declined considerably in Q1 2024, dropping 12.7%. LevelTen said the price drop was driven by a high volume of competitively priced projects under 50 MW that entered the LevelTen marketplace in Q1.

In 2023 LevelTen facilitated 42 power purchase agreements, contracting over 98 million MWh of clean electricity from solar and wind. The company expects that figure to grow in 2024.

The company sees current prices as a window of opportunity for buyers as Scope 2 emissions deadlines and competition for PPAs increases, potentially pushing prices higher in the near-term. LevelTen developed an accelerated negotiation process for its customers, bringing the typical 12-month or longer PPA negotiation down to about 100 days. The accelerated process, called LEAP, has led to 1.5 GW of renewables procurement in a partnership with Google.

“While prices are relatively stable this quarter, they remain high, and companies need options. Bundling PPAs and clean energy tax credits together is an emerging alternative for buyers that can make their procurements more financially sustainable,” said Mumford.