North American PPA prices rise in first quarter as IRA stabilises market

LevelTen’s ‘25th percentile’ or P25 index for wind rose 4.9% to $51.12 per MWh in the first quarter of 2023, after a modest dip in the previous quarter, said the Seattle and Madrid-based company. 

The Inflation Reduction Act (IRA) has boosted renewables development, but regulatory uncertainty looms, said the report. 

The US tax authorities have yet to issue guidance on how companies can qualify for IRA clean-energy tax credits.

Impact of IRA on PPAs

“Developers are working to understand what impact the [IRA] will create on PPA prices, and at the same time, they are processing how new federal and local policies will affect their business,” said Rob Collier, vice president of energy marketplace at LevelTen. “These factors, coupled with a complex supply chain environment and rising capital costs, contribute to pricing showing a mixed picture.” 

Collier continued: “Last quarter, LevelTen’s wind index dropped for the first time in nearly two years, and we hoped that was a signal that the IRA was creating a stabilising effect. However, our wind index is back up again. It’s probably a sign that developers are still taking time to understand the impact the IRA will have on PPA prices.” 

Regional volatility 

Wind prices also showed regional variability in Q1 2023, “blowing in different directions”, said LevelTen.

Wind offer prices decreased 10.3% in the ERCOT independent system operator (ISO) in Texas, the only ISO to see a drop this quarter. Meanwhile, they rose 20.7% in SPP in the Great Plains and western Midwest and by 9.4% in MISO in the eastern Midwest/Southern US compared with last quarter. 

“Growing wind penetration in SPP is having a material impact on market dynamics in the region. Wind facilities there are facing a more challenging financial picture as increasing wind generation drives down capture prices for wind assets operating there,” said Gia Clark, senior director of strategic developer accounts at LevelTen Energy.