Utility Scale

Finally, North American solar PPA prices begin to stabilize

Finally, North American solar PPA prices begin to stabilize
AVANGRID developed the 162 MWac/205 MWdc Pachwáywit Fields solar farm in Gilliam County. (Courtesy: AVANGRID)

After years of rising solar power purchase agreement prices, North America is seeing signs of stabilization, according to a new market report.

Overall, solar PPA prices nationally decreased by 1% from Q1 to Q2 2023, based on offers made on LevelTen Energy's marketplace. This is the first time since Q1 2020 that market-averaged continental solar PPA prices decreased.

Supply chain constraints, trade disputes, macroeconomic headwinds, and interconnection delays had pushed solar PPA prices higher for the past several years. Normalizing supply chains and support from the U.S. Inflation Reduction Act have contributed to the recent softening, LevelTen said.

“It’s a promising indication that conditions are starting to stabilize,” senior director of strategic accounts at LevelTen Energy. "While we certainly haven’t solved all of these issues, we’re making progress."

Increased mobility in the solar supply chain is also likely contributing to Q2’s solar PPA price trends. Wood Mackenzie and SEIA have reported that 12 GW worth of PV modules crossed the border into the U.S. during Q1 2023 alone, compared to only 29 GW imported during all of 2022, which contributed to 6.1 GW of solar capacity additions.

Solar PPA prices did increase in one market, ERCOT (14%), likely due to several anti-renewables bills considered in the 2023 Texas legislative session.

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Wind PPA prices keep climbing

Wind PPA prices haven't enjoyed the same relief.

Wind prices are increasing because of a range of factors, LevelTen said, including interconnection and permitting challenges, which are preventing new supply from coming to the market, while demand for wind is rising.

In Q2, the LevelTen's P25 price for wind increased 13% over Q1 numbers and 30% year over year.

“Wind projects typically have higher capacities and are less flexible in siting conditions than solar projects, making it more challenging to secure land control. Permits tend to take longer due to a more complex environmental review process. Additionally, we’re hearing from developers that interconnection studies are taking longer than ever, and when they do come back, interconnection costs are far higher than historical norms,” Clark explained.

According to Berkeley Lab, the typical duration from connection request to commercial operation increased from less than two years for projects built between 2000 and 2007 to nearly four years for those built between 2018 and 2022.