The cost of commercial and industrial scale solar and wind power is still headed down. Power purchase agreement (PPA) contract prices examined in five independent energy distribution territories in the country showed indexed prices down by $0.39/megawatt-hour, or 2.3% during first quarter of this year compared with the fourth quarter of 2018, according to LevelTen Energy’s latest report in May.
The LevelTen Marketplace examined 1,100 projects in the five regions, including the California Independent Service Operator – CAISO, the Electric Reliability Council of Texas — ERCOT; the Mid-continent Independent System Operator — MISO; the PJM Interconnection — PJM; and the Southwest Power Pool — SPP.
CAISO, ERCOT, MISO, PJM, and SPP showed that solar prices decreased in all markets except MISO, with the largest decreases coming from CAISO, PJM and ERCOT, compared with only moderate decreases in SPP, the analysts said. Prices were offered across a range of project commercial operation dates with contract tenors ranging from 10-25 years, the analysts said.
CAISO saw the biggest drop, with a 15% decrease in prices from Q4 to Q1, the report says. In CAISO, Palo Verde, SP15 and NP15 all saw a decrease PPA prices for the combined form of renewables. Of its three hubs, SP15 contributed most to the ISO wide 15% decrease, compared to the rest of the country, the report indicates. SP15 is located in the southernmost portion of the state.
For solar alone, the LevelTen index for solar prices dropped in all markets except MISO, which increased by 4%.
Overall wind prices also decreased, but not as significantly as solar prices, LevelTen reports. The analysts conducted a survey of 40 utility-scale renewable energy project developers to find out which market factors impacted their offer prices the most in Q1, a new feature in the report series. The results revealed that increased competition among developers and changes in engineering, procurement and construction (EPC) costs had the greatest impact, the survey indicates.
The report found six factors that impacted prices in Q1:
- The price of solar panels is down, as is the price of steel.
- There was an increase of 17% in the number of projects submitted over the Q4 2018 to Q1 2019 period.
- More commercial and industrial clients are incorporating risk-mitigating structures into their PPAs, including $0 price floors and collars, increasing risk for developers. Collars are financial instruments that hedge a loss against limited future gain.
- Corporations are continuing to invest in renewable energy through PPAs.
- More states have passed Renewable Portfolio Standards with deadlines ranging from 2020 to 2040, encouraging utilities to sign PPAs with renewable energy projects.
- Federal ITC benefits for wind will expire in 2020 for wind projects, while solar credits will be reduced to 26% for projects that begin construction in 2020.
LevelTen also advises clients on the best PPA for their purposes. If a corporation chooses the wrong project, it could fail to create an effective hedge and end up owing the developer hundreds of thousands of dollars – or even millions – each year, thereby paying an out-of-market premium for the RECs it receives, the advisors say.
To facilitate and make the request for proposal process more transparent, LevelTen Energy’s RFP automation tool turns a typically “labor-intensive practice fraught with human error into an efficient and standardized process driven by technology,” the company says. The RFP Automation tool is fully integrated into and powered by LevelTen Energy’s platform, which features up-to-date PPA pricing on over 1,600 projects across North America.
LevelTen Energy does not charge developers to participate, ensuring that buyers have access to every project available, not just those who have paid-to-play, the company says. LevelTen also aggregates companies that want to purchase renewable energy and connects them with renewable energy suppliers, thus allowing them to access PPA agreements that are usually reserved for high demand customers. See Energy Aggregation Brings Renewable Energy To More Companies, CleanTechnica, January 18th, 2019.
In January, LevelTen helped five companies – Bloomberg, Cox Enterprises, Gap Inc., Salesforce, and Workday – arrange agreements to purchase 42.5 megawatts of a 100-megawatt solar project, collectively acting as an anchor tenant for the project, enabling the developer, BayWa, to accelerate its development, LevelTen says.
LevelTen Energy, Inc. (LevelTen) is a commodity trading advisor (CTA) registered with the Commodity Futures Trading Commission (CFTC) and is a Member of the National Futures Association (NFA).