North American wind PPA prices rise amid increased project risks

The rise was because of factors such as high input costs and high interest rates, said PPA marketplace operator LevelTen, which reported the prices.

In the previous quarter, wind PPA prices in Noth America flattened, as wind developers continued to face higher costs, including the growing cost of financing, interconnection, labour and supplies – despite the boost from US federal tax credits under the Inflation Reduction Act (IRA).

Regional variations

Offered wind prices saw a wide variation between different electric grid regions.

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.

Prices for wind power ranged from a 6% decrease in CAISO – California’s transmission system operator – to an 18% increase in the Southwest Power Pool (SPP). Regional factors played a strong role in this variable picture, including interconnection challenges and queue backlogs, according to LevelTen. 

“With high demand for renewable energy continuing in all locations, developers are managing the impacts of economic uncertainty and incorporating that risk into their prices,” LevelTen said. 

LevelTen’s P25 Price Index went up 8% in the Electric Reliability Council of Texas (ERCOT). Meanwhile, P25 prices in CAISO decreased 6% and 1% in the Midcontinent System Operator (MISO) region. 

Wind prices in PJM, in the mid-Atlantic region of the US, were up 30% year over year.

Risk-profile

“The trend of developers incorporating macro-level uncertainties into pricing continues,” said Sam Mumford, analyst, energy modelling at LevelTen. 

 “SPP’s 18% increase in P25 prices indicates that certain projects are seeking prices above the market’s rolling average, likely due to the increased risk associated with current macroeconomic factors like the higher cost of capital,” he said.