Dive Brief:
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Wind power purchase agreement prices rose 7% during the second quarter, while the cost of the average North American solar PPA rose 3%, according to LevelTen Energy, which runs an online marketplace for energy transactions.
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Solar PPA prices remain relatively flat; prior to this quarter's modest rise, prices had dropped 1% in the first quarter. Wind PPAs, however, are increasingly expensive, with the average price for a North American, wind-based PPA up 13.5% year-over-year.
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Wind projects face a growing number of upward price pressures, according to Mitchell Reay, senior manager for operational analytics at LevelTen Energy. But he said the trajectory for solar PPAs seems less certain.
Dive Insight:
Wind PPA prices continue to climb, but demand for them hasn't let up despite these price hikes, according to LevelTen Energy.
Wind PPAs have become particularly popular with tech companies looking for clean energy to power data centers overnight, according to LevelTen Energy. But they also face “fairly structural headwinds that have fundamentally raised the cost of building new wind facilities,” Reay said.
Wind projects face the same interconnection delays and permitting challenges that solar projects have experienced, but wind developers must also contend with the dwindling availability of land suitable for new projects, Reay said.
Most of the best plots have already been developed, and so new projects must consider sites that require more extensive infrastructure upgrades and have lower capacity factors, he said.
Wind projects have also been particularly hard hit by inflation, and developers have reported to LevelTen that they have experienced a sudden spike in insurance premiums as a result of more severe weather events, Reay said. Outside severe weather events, average U.S. wind speeds appear to be declining in key wind energy producing regions, which may be a result of climate change.
“These risks are bundled into PPA prices to reflect either the direct costs of addressing them, or to add in a risk premium that provides some future-proofing,” Reay said.
Price trends for solar PPAs are more mixed, Reay said. On one hand, incentives from the Inflation Reduction Act and the anticipation of future interest rate cuts is putting downward pressure on solar PPA prices. On the other, the threat of new tariffs could trigger more upward price pressure, he said.
LevelTen Energy has also seen increased demand for new types of PPAs, including mixed resource PPAs and PPAs with an energy storage component, Reay said. However, the company declined to share price data on these types of PPAs.
LevelTen Energy recently raised a $65 million funding round to expand its platform to cover new markets such as green hydrogen and to grow its geographic footprint.
