European solar, wind PPA prices drop to two-year low: LevelTen

Prices for renewable power purchase agreements in Europe receded to a two-year low in the second quarter of 2024, driven by aggressive offers and a weaker power price outlook, PPA marketplace LevelTen Energy said in its quarterly update.

LevelTen's solar price index stood at Eur62.83/MWh, the lowest since the second quarter of 2022. Meanwhile, the wind power index was Eur91.59/MWh, the lowest price since the third quarter of 2022.

Solar prices as captured by LevelTen's market-averaged index dropped 7% compared with the first quarter. A large number of competitive market solicitations were run through the platform during the period, LevelTen said July 18.

At the same time, updated power price forward curves show a far more muted outlook in Europe, with natural gas stockpiles solid and growing concern over high renewables penetration creating low or even negative pricing hours.

"These low spot prices add challenges for developers, who need sustainable revenue streams to secure project financing," LevelTen said.

Prices dropped nearly everywhere, from Sweden to the UK, Germany and Italy. Denmark also reentered LevelTen's index, which the group said points to growing solar development momentum in Northern Europe.

Spanish solar holds steady

Meanwhile, Spanish solar PPA prices held steady in the second quarter, coming in at the lowest in Europe at Eur38.50/MWh. Developers in Europe's biggest solar market may be hitting a floor, LevelTen said.

With price cannibalization already driving very low spot prices in Spain, developers may now be unable to further lower their offers while still recouping development costs and achieving acceptable profit margins.

Abundant cheap renewables in Spain could also lure more large offtakers to the country. In May, Amazon.com announced a large-scale investment drive for datacenter construction in Spain.

Finland to draw data center crowd

LevelTen's index for wind power PPAs fell 3% compared with the first quarter. Wind offer prices range widely across Europe, LevelTen said, from Eur45.10/MWh in Finland to over Eur100/MWh in France and the UK.

Differences are the result of unique development environments across different markets, where policy, land availability and permitting processes influence the ease with which wind developers can build new facilities.

Finnish wind prices have declined by more than 20% year over year, LevelTen said.

"This can be at least partly attributed to a rise in negative-price hours on the Finnish grid, which compel developers to reduce PPA prices to reflect the value-eroding impacts low- and negative-priced hours have on PPA settlements," LevelTen wrote in the report.

While price cannibalization occurs, Finland may also benefit from growing demand as tech majors look to secure vast amounts of clean energy capacity for data centers.

"Finland may emerge as a highly desirable market due to its low PPA prices, relatively easy permitting regime and cold temperatures that can help keep hot data centers cool, reducing their energy demand and running costs," LevelTen said.

Strong year for renewable PPAs

Overall, 2024 is shaping up to be a strong year in Europe for renewable power purchase agreements.

European buyers secured 21 TWh/year of new green electricity from 10 GW of new projects in the first five months of 2024, largely on par with 2023 at this stage, according to the S&P Global Commodity Insights PPA database.