Dive Brief:

• The cost of solar power purchase agreements could begin to decline as early as 2026 amid a buyer's market that is increasing competition between solar developers, according to analysis from Enverus Intelligence Research.
• As of 2024, most markets have enough solar in queue to meet demand at $20/MWh to $30/MWh, according to Enverus. PPA prices remain closer to $50/MWh within the territory of the New York Independent System Operator on account of weaker solar resources and higher costs, Eneverus said in analysis released on March 20.
• The projected price declines depend on policies such as the Inflation Reduction Act tax credits. A repeal of tax credits for renewable energy projects, though considered unlikely by most political analysts, would render significant numbers of solar projects uneconomic, according to Corianna Mah, an analyst at Enverus.

• Dive Insight:

After several years of rising prices, solar PPA contracts could see some price declines in the years to come, according to Enervus.

Tax incentives and demand from large tech companies have prompted solar developers to queue up more projects — and the growing availability of new solar power has created a buyer's market for companies looking to procure renewable energy.

Enverus doesn't expect to see dramatic cuts to the cost of solar contracts — PPA prices have remained relatively stable in recent months, and will likely continue to do so, Mah said. The likelihood that prices will fall to the levels seen in the 2010s remains low. But with so many solar projects looking for offtakers, renewable energy buyers have more power to name their terms — and they generally prefer lower-priced, shorter-term PPAs, Mah said.

The average PPA duration has dropped from 20 to 25 years — reflecting the expected lifespan of a typical solar project — to 17 to 19 years, according to Enverus.

Mah noted that the expected decline in PPA prices assumes certain factors remain constant. The vast majority of solar projects remain dependent on tax credits created or extended by the Inflation Reduction Act. Should Congress choose to repeal those incentives, Mah said, most projects currently in development would no longer pencil out financially.

Solar supply chains also remain dependent on the IRA's manufacturing tax credits. Most domestic producers of solar panels need the incentives to compete with foreign manufacturers, Mah said. Additional tariffs could put pressure on domestic supply chains, likely increasing prices for U.S.-made solar equipment and prompting more developers to seek imported materials to which the tariffs will apply.

Rising interconnection costs could also cause more solar projects to drop out of the queue, but Mah said the number of projects leaving the queue for this reason is not large enough to have a material impact on overall PPA price trends.

Wind PPAs, Mah said, have not seen the same increase in availability, and so are unlikely to see the same downward price trend expected in solar. Wind projects remain more heavily impacted by physical constraints such as the availability of land, and face growing political opposition, limiting the number of new onshore wind projects available for contract.