Renewable power prices in major global markets sharply climbed as companies turned to green energy, a hedge against rising fossil-fuel costs.
Accordingly, LevelTen Energy, the operator of the world’s most significant power-purchase agreement (PPA) marketplace, reported a considerable upturn.
It revealed that wind and solar power contracts skyrocketed by 28.50% year-over-year in North America. Likewise, renewables in Europe soared by 27.50% in the previous year.
In the first quarter, PPA costs in the US posted nearly $40.00 per megawatt-hour, a gain of 9.70%. Then, European prices elevated to $62.00 per MWh, an uptick of 8.60%.
Developers have grappled with chaotic supply chains and surging costs for shipping materials and labor.
In line with this, PJM Interconnection, a US regional transmission, recently proposed a two-year halt on reviewing new projects. The plan came as it worked through a backlog of nearly 290,000 megawatts worth of solar, wind, and storage applications.
Moreover, the Russian invasion of Ukraine added weight to the existing disruptions. It reversed a decade of cost declines for the green energy sector.
Consequently, the ongoing war has led governments to reduce dependence on natural gas from Moscow, further boosting the robust demand.
Several analysts warned that the higher renewable power prices could slow demand growth. Meanwhile, the United Nations has called for the industry to expand rapidly to avoid the worst effects of climate change.
In addition, there are aggravating challenges in North America. The sector is uncertain whether US lawmakers will extend tax breaks for renewable energy facilities.
At the same time, developers remained concerned about a commerce investigation initiated this year. This move could result in tariffs on solar panel imports from Asia, further pushing up costs.
Markets optimistic for the renewable power industry
LevelTen ensured that the demand for PPAs would remain strong in the coming years. It noted that the soaring prices had not slowed the industry’s appeal.
In a poll the company conducted, 75.00% of energy advisers said their clients have accelerated or maintained procurement plans. Remarkably, corporate agreements for renewable power increased to a record last year.
Consequently, renewable power is still a bargain compared to the wholesale market. The electricity prices align with the most expensive generation technology.
For instance, the benchmark German electricity for the next year is more than three times higher than a PPA at nearly $216.87 per MWh.
Meanwhile, experts explained that the mounting costs could trigger the interest in pricier technologies like green hydrogen and biofuels.