North American wind PPA prices stable in Q1 – LevelTen
North American wind PPA prices stable in Q1 - LevelTen | Windpower Monthly
North American wind power purchase agreement (PPA) prices increased by 2.4% between the fourth quarter of 2023 and the first quarter of 2024, indicating stability, according to new analysis.
But Q1 2024 prices were up 20% year on year, according to PPA marketplace operator LevelTen Energy.
LevelTen’s P25 price index represents 25th percentile PPA prices – meaning 75% of contracts fall above that value. All of LevelTen’s PPA price data is based on developers’ offered prices for PPAs, not transacted PPA prices.
A scarcity of wind PPA offers has driven the upward price trajectory, though recent years’ inflationary pressures have also pushed many wind projects into uneconomic financial territory, according to LevelTen.
The availability and pricing of turbines remain a challenge for developers.
“The double-edged sword of inflation and the high interest rates aimed at combatting it has created a difficult financing journey for many wind projects,” LevelTen stated.
Permitting challenges, community opposition, and land scarcity further exacerbate these issues, said LevelTen, citing Alberta’s restrictive measures that could ban several wind projects.
“Nonetheless, wind projects’ unique production profiles make for appealing economics for many potential offtakers,” the report concluded. “And demand for available wind PPAs should remain robust, particularly among offtakers seeking higher capture prices in solar-saturated markets.”
Related Knowledge Center: Offshore wind energy
Over the next decade, U.S. offshore wind power is expected to grow from a single 30-megawatt wind farm off Rhode Island to more than 2,000 MW of capacity along the Atlantic Seaboard. There are contracts for wind power off the coasts of Massachusetts, Connecticut, New York, Maryland, New Jersey, Rhode Island, and Virginia.
The National Renewable Energy Laboratory has estimated the United States has over 4,000 gigawatts (GW) of offshore wind potential, enough to power the country four times over.
The growth in part being spurred by state solicitations, including in New York, where then-Gov. Andrew Cuomo (D) set a commitment of 9,000 MW of offshore wind by 2035, and in Connecticut, where in June 2021, Gov. Ned Lamont (D) signed legislation authorizing the construction of 2,000 MW of offshore wind by 2030.
The offshore development is also being driven by an investment tax credit set to end in December 2019 and is equal to 12 percent of expenditures. U.S. Sens. Susan Collins (R-Maine) and Tom Carper (D-Del.) have introduced a bill to extend the tax credit for up to eight years.
The Interior Department has held eight competitive lease sales that resulted in 15 offshore wind leases over 1.7 million acres that has the potential for 21 GW of capacity. In February 2022, the Bureau of Ocean Energy Management completed a bidding process that realized $4.37 billion for 488,000 acres across six lease areas in federal waters off New York and New Jersey.
Projects have also been proposed off the Southeast coast, off California and Hawaii, and for the Great Lakes.