Photo voltaic PPA costs rose 11.5% over the course of 2020, in accordance with the This autumn 2020 PPA price Index from LevelTen Power — the primary enhance in photo voltaic costs because the LevelTen price report started. Wind costs noticed a 24.3% enhance over the identical time interval.
Whereas COVID-19 performed a task within the enhance — 26% of builders informed LevelTen they raised their costs to cowl prices incurred by COVID—demand in extra of provide seems to be the principle driver. “Many of the most economically competitive projects have already contracted with offtakers, leaving higher-priced projects available in the market,” in accordance with Rob Collier, vp of developer relations for LevelTen Power.
Demand will possible proceed to exceed provide in 2021, in accordance with Collier, doubtlessly making a sellers market within the renewable vitality house, which stays aggressive in opposition to standard types of vitality. “Organizations should not wait to act on their sustainability commitments,” Collier mentioned. “If climate and right-to-operate risks weren’t already lighting fires under executive teams, the financial incentives for locking in the best projects now should be the catalyst for action.”
Whereas some feared the pandemic might gradual the adoption of renewable vitality and erode assist for sustainability targets, year-end knowledge suggests the other proved true: 2020 noticed the best demand for renewable vitality but, lifting costs after years of decline, in accordance with the report.
Costs for photo voltaic PPAs have fallen steadily, a results of improved expertise and elevated competitors available in the market, because the inception of the LevelTen price report in 2010, in accordance with Collier. However a tidal shift started within the first quarter of 2020, Collier mentioned. Photo voltaic started to tick upward, regardless of ongoing decreases in the price of the expertise itself, and wind, which has seen slight will increase previously, started a steep upward enhance. Wind costs now exceed 2018m ranges at $32.18/MWh, and combined useful resource PPA gives additionally rose 17.7% within the final 12 months.
COVID-19 did play a task in these will increase, Collier mentioned, nevertheless it was solely one in every of many components. The price of allowing and interconnection has elevated, he mentioned, on account of bottlenecks in some markets. 4 of 5 ISOs noticed elevated photo voltaic costs this 12 months. CAISO, in accordance with LevelTen, was the one exception, with costs remaining comparatively flat at $25.10/MWh. PJM continues to pay the best costs for photo voltaic, operating $37.50/MWh.
Financial competitors has additionally triggered price will increase, in accordance with LevelTen. “As the best locations get scooped up, identifying and securing permits and interconnection positions—in the absence of broad based reform in these two areas—becomes more challenging for new, highly economical projects,” the report says.
Some builders have turned to cost-cutting measures to take care of a aggressive place available in the market, in accordance with LevelTen, with 19% of builders telling LevelTen that they’d downsized their operations and reduce on overhead previously 12 months.
Nonetheless, Collier anticipates that sturdy demand for renewable vitality will proceed to drive elevated renewable vitality prices in 2021. PPAs stay a cost-competitive type of vitality technology, he mentioned, and prospects count on elevated funding in renewable vitality. “Boards of directors, investors, governments, employees and consumers will continue to push for sustainability commitments that will require all large energy consumers to turn toward renewables,” Collier mentioned.
A professional-renewable Biden administration and Congress, he added, may assist alleviate a few of the allowing and interconnection challenges which have edged costs upward.
Different authorities actions, he mentioned, might additional lower prices for the renewable business. However Collier didn’t count on these actions might overcome the tempo of demand for renewable vitality in 2021, which he mentioned might truly speed up because the monetary incentive to maneuver rapidly grows.