Deflating capture prices pull solar, wind market values down across Europe in 2024

Weakening capture prices for solar and wind across Europe's main power markets have deflated 2024 market values of green electricity, with Spain and Germany most impacted, S&P Global Commodity Insights data show.

Volume-weighted average capture prices (VWAPs) for solar in Spain fell 40% year over year to Eur45.56/MWh while German solar fell 31% to Eur54.64/MWh amid record PV generation after a boom in installations, according to Platts assessments for Commodity Insights.

"While slow power demand recovery and exceptionally high hydro conditions have contributed to undermine spot capture prices, this past year's market pricing dynamics unequivocally confirm that renewable plant developers must secure long-term contracts to stabilize their revenues and advance their projects," said Bruno Brunetti, head of Environmental Markets and PPA Analysis at Commodity Insights.

In key markets, spot capture prices for 2024 have declined to levels significantly below what is necessary to recover their full costs, Brunetti added.

The theoretical market value of 2024 wind and solar output in Europe's Big Five markets (Germany, Spain, Great Britain, France, Italy) was estimated around Eur35 billion, down 22% year-on-year, based on the VWAP and annual generation for each asset category. Annual wind and solar generation was up 2% at a combined 527 TWh across the five markets.

Capture price forecasts

Capture ratios also deflated with German solar only capturing 69% of the average wholesale power price in the day-ahead market, Commodity Insights data showed.

In Spain, monthly capture prices plunged below Eur10/MWh last April with solar capture rates averaging only 58% during spring.

Further solar PV capacity gains -- with EU27 solar capacity set to reach 400 GW later this year and potentially 500 GW in late 2027 -- will add pressure on solar capture prices outside winter.

"We see greater erosion of value of solar capture ratios in solar-heavy markets – the average effect is greatest in Spain but Germany sees May 2027 solar capture ratios drop almost to zero in our modelling," said Kerry Thacker-Smith, European power lead analyst at Commodity Insights noting that wind and solar could cover 43% of annual demand in Europe's main markets in 2027.

However, capture prices have started to recover this winter, partly on the back of gas price gains, while costs for solar projects have dropped sharply over recent years.

Platts assessed utility-scale PV modules (50-100 MW, DDP Europe) at $0.095/W on Jan. 28, down from peaks around $0.13/W last July.

For wind, the capture price outlook is more positive, but needs to be seen in the context of higher project costs, especially offshore.

Meanwhile, breakeven levels for European wind and solar power purchase agreements eased in 2024, but remain well above spot capture prices, according to a report by Commodity Insights.

"Recent developments in solar capture prices in Spain, and even more so in France, Germany, and Great Britain, raise significant red flags for offtakers seeking to secure contracts," Brunetti said.

"Interestingly, as the market becomes increasingly aware of the cannibalization risks associated with solar PV, the developments in onshore wind capture prices indicate that these risks should not be underestimated for wind as well, We believe that 10-year PPAs need to be priced approximately 10-15 euros above the 2024 average spot capture prices to achieve breakeven in Spain and Germany," he added.

Italy remains a bright spot for renewable revenues, with spot capture prices significantly exceeding breakeven levels for both solar and onshore wind.

Despite all this, 2024 was another strong year for PPAs across Europe with some 361 deals for 24 GW capacity (including existing assets and PPAs that are part of CFD contracts), according to Commodity Insights data with Spain once again leading Europe's PPA market.

Beyond the capacity contracted under PPAs, it is noteworthy that the average size of the deals is decreasing, indicating that smaller players are now able to secure PPAs, while also reflecting a more cautious market approach toward risk-taking, Brunetti said.

Since 2017, almost 1,300 PPA deals covering some 112 GW of capacity for 278 TWh/year of clean electricity have been registered, according to the S&P Global Commodity Insights PPA database.