According to a report from price tracking platform LevelTen on Thursday, prices for European power purchase agreements (PPAs) concerning green electricity witnessed a 2% decline in the fourth quarter of 2023. The dip in prices suggests an opportune moment for corporate buyers to secure new agreements ahead of an anticipated surge in demand.
PPAs are bilateral long-term contracts between corporate power consumers and renewable energy project developers, providing consumers with a stable power supply and developers with a guaranteed income stream, facilitating financing arrangements.
This development aligns with the eagerness of corporate buyers to ensure a carbon-free power supply, driven by the 2023 European renewable energy directive mandating 42.5% of EU electricity to be renewable by 2030. LevelTen's market-averaged index, monitoring PPA prices for wind and solar energy across 16 European countries, revealed a decrease of 2% from October to December, settling at 85.38 euros ($92.31) per megawatt-hour (MWh).
The report attributed the price decline to improvements in supply chains for solar modules and enhanced regulatory measures boosting wind capacity. LevelTen's prices consider contracts spanning five to 20 years, with settlements based on hourly day-ahead wholesale market prices.
Plácido Ostos, LevelTen's Director of European Energy Analytics, suggested that buyers might find it advantageous to secure PPAs now, given the potential for inflationary pressures and further reductions in equipment prices in the future. Ostos emphasized the sustained high demand driven by the macroeconomic trend towards electrification and the expanding green hydrogen sector in Europe, which is expected to significantly increase demand for clean energy capacities in the coming years.
A separate report from Swiss advisory firm Pexapark indicated a noteworthy 40% year-on-year increase in the contracted PPA capacity in Europe, reaching 16.2 gigawatts (GW) for 2023.