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Renewable Power Purchase Agreements More Expensive in 2021, Says LevelTen Energy Report

(Credit: EQMagPro)

Power Purchase Agreements for energy generated by renewable sources such as solar and wind became more expensive in 2021, according to LevelTen Energy, a software developer that connects renewable energy buyers and sellers. This continues last year’s trend of rising prices. Previously, in the years 2018 and 2019, prices had been trending downward.

The company, which tracks solar PPAs quarterly, found that their average cost in the US spiked 5.4% during Q3 2021 and 19.1% relative to this point last year.

LevelTen cited “regulatory uncertainty” and “a global supply chain squeeze” as two causes of the price increase. Last quarter, human rights abuses were reported in the solar supply chain within China’s Xinjiang province. As a result, developers have had to look elsewhere to source parts from “an already tight PV component market.” More recently, Asia-based PV importers have stopped shipments to the US following tariff threats, further straining solar supply.

With regard to wind, outdated electricity transmission infrastructure is causing interconnection difficulties, particularly in the Pennsylvania-New Jersey-Maryland region, further reducing renewable energy supply.

These conditions are causing a slowdown in development timelines, making it difficult for renewable energy suppliers to keep up with “unprecedented demand” spurred by pressure on businesses to meet greenhouse gas reduction commitments. Commenting on this, LevelTen’s VP of Developer of Solutions Rob Collier stated,

“Though this is a highly competitive market, we know that many buyers still need to procure to hit renewable energy deadlines that are right around the corner. Buyers that are motivated, decisive, and flexible in their procurements will succeed.”

Power purchase agreements pair an energy developer with an energy buyer. The developer builds a power plant of some kind on the buyer’s property, retaining ownership and selling the electricity generated to the buyer at agreed upon rates for a fixed duration of time — usually between 10 and 25 years. At the end of the term, the buyer may choose to extend the agreement, have the developer remove the system, or offer to purchase the power plant outright.

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