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PPA prices dip in Q4 2020 as developers absorb COVID impacts: LevelTen

Highlights

Nordics maintain lowest offer prices

Wind index dips to Eur47.60/MWh

Solar index down to Eur41.10/MWh

London — COVID-19 challenges did not have a significant impact on power purchase agreement offer prices in the fourth quarter of 2020, with prices trending lower on the previous quarter, PPA platform LevelTen Energy said Jan. 13.

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LevelTen's latest quarterly report covers 15 renewable energy markets across Europe, focusing on the most competitive (25th percentile) offers from developers.

In a survey of developers, only 26% of respondents said they had increased PPA prices to overcome challenges caused by COVID-19, it said.

Others chose to take internal measures to maintain competitive PPA prices, with 19% of respondents saying they had downsized operations and overheads, and 11% saying they had lowered their internal rate of return for projects.

Overall, the platform's P25 Index for wind PPA offers in Europe dipped to Eur47.60/MWh for Q4 2020, from Eur48.40/MWh in Q3 2020.

For solar the index fell to Eur41.10/MWh in Q4 from Eur42.30/MWh in Q3.

Wind PPA offers for Q4 ranged from a low of Eur30/MWh in Finland up to Eur91/MWh in France, while solar offers ranged from Eur31/MWh in Denmark to Eur62/MWh in Austria.

Offers quoted in the index are fixed prices over the offer term, ranging from 10 to 15 years, based on an as-generated production profiles.

"Once again, the lowest solar prices in Europe occurred in Denmark and Sweden, which have a high penetration of renewables that keeps the market price of electricity low, therefore lowering PPA price offers," said Flemming Sørensen, Vice President of Europe at LevelTen Energy.

"Spain also has low solar prices, on par with Sweden. One reason may be that Spain has a high number of projects under development, driving competition among developers that puts downward pressure on PPA prices," he said.

Spain aims to contract around 3 GW of renewables per year over the next six years, while an energy reform bill has proposed state-funded PPA credit support of up to Eur600 million. This would reduce risk in Spanish projects, putting downward pressure on PPA prices, Sørensen said.

An outlier was the UK, which saw a 4.7% rise in solar prices in Q4 2020 from the previous quarter. One factor here could be the government's announcement in November that solar projects could once again participate in Contract for Difference auctions, with the next auction scheduled for late 2021.

In wind, the Nordics would likely continue to have low prices given excellent resource and land availability, "whereas France's wind prices are likely to remain high due to the combination of a challenging permitting process, lack of available land for large wind projects, and the government contract-for-difference scheme," Sørensen said.

Some 80% of European projects with offers on the LevelTen platform were for solar projects. The median project size for solar offers was 12.9 MW, while for wind offers the median size was 30 MW. This compared to 120 MW and 200 MW for solar and wind respectively on LevelTen's US platform.

WIND AND SOLAR OFFER PRICES BY COUNTRY, Q4 2020 (Eur/MWh)

Wind
Solar
Finland
30
Denmark
31
Lithuania
34
Sweden
35
Spain
36
35
Netherlands
39
Italy
42
Romania
44
Poland
49
Germany
55
49
UK
53
49
Hungary
50
Austria
62
Czech Rep
69
France
91

25th percentile offer prices

Source: LevelTen Energy