Dive Brief:
- Solar power purchase agreement prices rose 3.3% during the fourth quarter of 2024, according to data from LevelTen Energy's PPA marketplace. Wind PPAs also rose 3.3% during the fourth quarter, for a total year-over-year increase of 13%.
- The increased solar PPA prices — a trend that was not reflected in data from Canada's PPA market — could be related to uncertainty around the implementation of tariffs and tax credits under the Trump administration, according to LevelTen Energy.
- While LevelTen Energy anticipates that PPA prices will continue to rise, it’s still too soon to say exactly what impact the Trump administration will have, according to Stefan Pugatchenko, director of commercial analytics at LevelTen Energy. Some policy actions proposed by the Trump administration could raise PPA prices, while others have the potential to cut prices, he said.
Dive Insight:
U.S. PPA prices continue to rise despite cuts to prices elsewhere in North America, but it's unclear whether the upward trend will continue into the future, Pugatchenko said.
Average solar PPA prices rose just .3% across North America in the fourth quarter on account of a steep drop in prices in Alberta, according to LevelTen data. In the U.S., solar PPA prices rose between 1.6% and 8.2% in four of five independent system operator territories; solar prices dropped 2% within the Texas Interconnection operated by the Electric Reliability Council of Texas.
Year-over-year, prices for solar PPAs within the ERCOT area fell .3%, while the other U.S. independent system operators posted annual gains ranging from 6.7% in the PJM Interconnection to 24.7% within the territory of the California Independent System Operator. Wind PPAs were up across the board except within the Midcontintent Independent System Operator territory, where they have fallen 1.9% since the end of 2023.
Demand for wind energy continues to grow on account of the resource's ability to provide clean energy overnight, which has made it popular with tech companies and data center providers who are looking to meet ambitious 24-7 clean energy coverage goals. PPA prices seem likely to continue their steady ascent in response to demand, according to LevelTen Energy.
But renewable energy developers must also deal with the uncertainty surrounding the Trump administration’s energy policies, Pugatchenko said. The wind industry is still trying to understand what the pause in federal permits means for projects around the country, while solar developers face questions about the potential imposition of tariffs on imported equipment.
Tariffs could impact the price of building renewable energy and threats to tax credits created under the Inflation Reduction Act could force developers to find other ways to cover rising costs, potentially adding to the upward price trend, Pugatchenko said. On the other hand, de-regulation and faster construction of new transmission could put downward pressure on prices, he said.
Energy buyers and sellers have become more accustomed to tariffs and political uncertainty, and contracts that allow for price adjustments or changes in the construction schedule in the event of major regulatory changes have become common, Pugatchenko said.
“Time alone will reveal which policies ultimately come into effect, but the PPA market has proven time and again that it can successfully adapt to a variety of market conditions,” Pugatchenko said.
Even so, Pugatchenko added that current conditions seem likely to shift the market in favor of larger, more sophisticated energy buyers who can procure energy with greater speed and scale than smaller buyers.
