American Clean Power Association: US wind PPA prices rise faster than solar

Developers sought higher prices for wind in 2021 amid supply chain constraints and cost inflation, analysts explain

More than 12.7GW of new wind power capacity came online in the US last year (pic credit: GE)

US wind power purchase agreement (PPA) prices increased in 2021 and ticked up towards the end of the year, according to industry analysts, who cited developers seeking higher prices to offset supply chain challenges and cost inflation. 

Wind PPA prices across 2021 were up 19.2% from the previous year, driving a 15.7% increase in offtake mechanisms for renewables, according to market platform operator LevelTen Energy. Solar PPA prices had risen by 15.7% year on year.

The analysts also saw prices for wind power deals in the final three months of the year rise 6.1% quarter on quarter. This increase was slightly above the average quarter-on-quarter increase of 6%, as solar prices rose 5.7%.

LevelTen Energy explained that wind developers were seeking higher PPA revenues because the value of the US’s main subsidy for wind – the production tax credit (PTC) – is being stepped down.

The PTC, which gives wind operators relief on federal taxes for each kWh of wind power generated for ten years, was due to be reduced to 40% of the original rate for projects that began construction in 2021. As a Covid relief measure agreed at the start of 2021, that level was partly restored back to 60% of its original value, but developers are still seeking higher revenues, LevelTen stated.

In its annual report, the American Clean Power Association (ACP) explained that along with the end of some PTC schemes, developers were looking to achieve higher prices because of supply chain constraints, commodity price increases and trade barriers.

The ACP added that offtake agreements had helped boost the project pipeline. During 2021 corporate buyers announced PPA deals totalling over 14GW. And for the first time, corporate buyers signed more contracts than utilities (10GW). Last year, about 30% of PPAs were for wind projects. 

LevelTen stated that demand for power deals remained high, and grid connection delays and permitting issues meant prices were likely to continue to rise.

And in the longer term, as more companies seek to secure renewable energy supplies, PPAs were likely to change from a buyer’s to a seller’s market, the analysts forecast.