Ukraine War Pushes European Solar PPA Prices to €0.038-0.074/kWh

The latest report from Levelten Energy shows that the price of PPA linked to renewable energy has skyrocketed by nearly 30% in a year, especially due to the war in Ukraine.
European solar and wind PPA prices rose 27.5% year-on-year, according to the first-quarter power purchase agreement (PPA) price index from LevelTen Energy, a procurement platform for the U.S. renewable energy market.

In a previous report published last October, LevelTen Energy said the market was cooling. However, the war in Ukraine changed the situation significantly. As the latest crisis to affect the European renewable energy market, the conflict has led to an 8.6% increase in PPA prices for wind and solar, to an average of €0.057/kWh. In the case of solar, the price is between €0.038/kWh in Spain and €0.074/kWh in Lithuania.

Despite the favorable situation, there are significant connectivity and regulatory challenges (especially license-related) in several European markets, and prices are expected to rise further.

Luis López-Polín, European Senior Business Development Manager at LevelTen Energy, said: “In Spain, many factors have contributed to the continued increase in solar PPA prices.” He explained that, in addition to the huge demand for PPA, “more and more retail electricity providers are buying remaining capacity in order to meet their respective decarbonization goals and provide customers with green electricity. And, after Spain has experienced a storm of corporate contracts for renewable energy over the past two years, many projects with a higher development maturity have found bidders, This reduces the total number of available projects.”

He added that supply and demand dynamics are likely to continue to drive PPA prices higher with corporate PPA demand peaking amid the rapid approach to sustainable development goals and continued volatility in energy markets.

In Italy, Europe’s second largest collection of PPA products on the LevelTen Marketplace platform (27%), the cumbersome and lengthy licensing process makes it difficult for developers to keep up with the growth in demand. Last year, Italian lawmakers changed the environmental review process to simplify and speed up the process, but it will take time to see the changes reflected in the market. Italian solar PPA prices have surged by more than 23% year-on-year and are currently holding at €0.0515/kWh.

This quarter, Portuguese solar was included in LevelTen Energy’s PPA price index for the first time. Frederico Carita, Director of European Developer Services at LevelTen Energy, said: “In Portugal, we are seeing an increase in available solar capacity as more projects are licensed for interconnection, whether through successful bids in government auctions or through the normal permitting process.”

PPA solar prices also increased in Sweden, increasing by 13.4% to EUR 0.04013/kWh in the fourth quarter of 2021.

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