Prices for solar power purchase agreements (PPAs) continued their push higher to end 2022, a sign that an already tight North American offtake market was still hampered by supply chain constraints and trade disputes.
At the same time, however, wind PPA prices fell in the fourth quarter for the first time in nearly two years, according to a report from LevelTen Energy.
Gia Clark, senior director of developer services at LevelTen, said wind prices appear to be stabilizing in response to the Inflation Reduction Act, which was passed by Congress and signed into law last fall.
But for solar, enforcement of the Uyghur Forced Labor Prevention Act is hanging up gigawatts of module imports over human rights concerns. Moreover, the Commerce Department's preliminary determination that some solar manufacturers in Southeast Asia are circumventing tariffs against China has perpetuated supply-side uncertainty.
In the fourth quarter, North American P25 PPA offer prices rose an average of 2.7% to $47.19 per megawatt hour (MWh) on LevelTen's marketplace. North American P25 solar prices increased 8.2% during the fourth quarter, and have risen 33.3% year over year.
P25 prices are an average of the 25th percentile of PPA price offers of each market. PPA prices in LevelTen's report are price offers listed by developers on LevelTen's Energy Marketplace, not transacted PPA prices.
For the first time in nearly two years, LevelTen’s P25 wind index fell 1.9% to $48.71/MWh, while solar PPA prices climbed another 8.2% to $45.66/MWh.
GO DEEPER: LevelTen's Gia Clark joined Episode 21 the Factor This! podcast to discuss expectations for the PPA market in 2023, as well as the impact of the Inflation Reduction Act. Subscribe wherever you get your podcasts..
Wind PPA prices fell in SPP, MISO, and Canada's AESO. LevelTen analysis pointed to the Inflation Reduction Act in the U.S. and a 30% renewable investment tax credit in Canada as factors influencing the pricing relief. But prices rose both in ERCOT and PJM likely due to regulatory uncertainty in the former and congested interconnection queues in the latter.
Recent analysis from the Lawrence Berkeley National Laboratory found that interconnection costs in PJM have doubled for projects with completed studies and those in active service, while costs have grown eightfold since 2019 for active projects still in the queue.
PJM’s queue has ballooned in recent years, with 2021’s active queue increasing by 240% compared to year-end 2019.
Brett White, VP of regulatory affairs for the utility-scale solar and storage developer Pine Gate Renewables, said interconnection costs in PJM represent the "most significant barrier to the development of new renewable sources" in the region. And while reform efforts are underway, any policy changes will not address rising interconnection costs, he said.LevelTen Energy's Market-Averaged National Index
PJM saw among the highest solar price increases. Year over year, P25 solar prices in PJM have gone up 46%.