In a significant shift since Q1 2020, solar power purchase agreement (PPA) prices in North America have finally seen a decline. Thanks to the incorporation of the benefits offered by the Inflation Reduction Act (IRA) and a stabilized solar supply chain, the second quarter of 2023 witnessed a modest 1% decrease in the 25th percentile PPA prices compared to Q1 2023. However, it's worth noting that despite this recent dip, prices have still surged by an impressive 25% on a year-on-year basis.
LevelTen Energy, a prominent PPA services company, shed light on the pivotal role played by the IRA in this development. Having been introduced nearly a year ago, developers have become more adept at integrating the IRA's advantages into their business practices and strategies. The US Internal Revenue Service (IRS) and Treasury Department have offered substantial guidance, enhancing clarity on energy community bonuses, domestic content requirements, and tax credit transferability provisions.
Of particular significance is the tax credit transferability, which has opened up new possibilities for tax investment in renewable energy projects. Corporations can now utilize their federal tax burdens to support the expansion of clean energy initiatives, broadening the playing field and presenting a lucrative financial opportunity.
Gia Clark, senior director of strategic accounts at LevelTen Energy, emphasized that the recent stabilization of prices after years of steady increases makes the current moment ideal for procurement. The market remains competitive, so buyers are advised to act swiftly to secure favorable deals.
One of the factors that had previously constrained solar supply was the implementation of the Uyghur Forced Labor Prevention Act (UFLPA) by the US government, leading to restrictions on PV imports. Additionally, the prospect of added tariffs on solar imports from Southeast Asian producers had further affected supply. However, LevelTen Energy reported that these importation bottlenecks have eased in recent quarters, contributing to a surge in solar installations.
In Q1 2023 alone, a total of 12GW of PV modules were imported to the US, indicating a notable improvement over the 29GW of modules imported throughout the entirety of 2022.
While most regions experienced stable PPA prices in Q2, the Electric Reliability Council of Texas (ERCOT) stood out as an exception, with prices rising by 14% quarter-on-quarter. LevelTen Energy attributed this increase, in part, to regulatory uncertainty arising from several proposals during Texas' 88th legislative session. These proposals posed threats to renewable development in multiple ways.
