LevelTen Energy has released its Q3 European Power Purchase Agreement (PPA) Price Index Report, indicating a notable increase in solar PPA prices alongside a decline in wind prices during the quarter. For the first time in four quarters, Market-Averaged Continental P25 Solar PPA prices rose by 1.3%, primarily driven by increasing solar prices in Italy and Hungary. The solar PPA market in Europe is expanding, particularly in central and eastern regions, with heightened photovoltaic (PV) development momentum in countries like Romania, Bulgaria, Slovakia, and Hungary. Ireland also saw its first P25 solar price due to a sufficient supply of solar offers, catering to the anticipated growth in data center demand.
Conversely, Market-Averaged Continental P25 Wind PPA Prices decreased by 3.2% quarter-over-quarter, marking the fourth consecutive decline. Year-over-year, wind prices across Europe have fallen by 11.1%. Although wind supply chains have improved since pandemic lows, challenges persist. High turbine costs, ongoing permitting issues, and interconnection queue delays continue to hinder project timelines, although re-powering legacy projects may help mitigate some of these bottlenecks.
The report also highlights relief from recent interest rate cuts, with the European Central Bank reducing its deposit facility rate to 3.50% on September 18. This marks the second rate cut in four months, with expectations of further reductions from the Bank of England. Following the UK Labour party's recent electoral success, a more favorable clean energy policy environment is emerging, particularly with the lifting of the “de facto ban” on new onshore wind. Recent strong participation in government auctions signals a robust appetite for development.
Finally, the renewable PPA market in Europe is becoming more diverse, with emerging opportunities in central and eastern regions and increased solar options in northern nations. Corporate sustainability commitments will drive competition for contracts with mature projects that meet economic and timeline requirements. Additionally, anticipated demand growth from AI-driven data centers and the renewable hydrogen sector is poised to absorb significant clean energy capacity in the coming years. Given the current market stability, potential buyers are encouraged to engage early to secure contracts that align with their climate objectives.
