Solar power prices rising with demand

FEBRUARY 15, 2022

Recent BloombergNEF research shows that corporations procured a record 31GW of renewable energy in 2021, and LevelTen Energy says that growth occurred despite more than a year of price increases.

BloombergNEF has reported that global procurement of renewable energy contracts by corporations has set a new record of 31GW of capacity. Most of that capacity was procured in the Americas, with 17GW coming from the United States and 3.3GW from other nations in North and South America.

Europe, in the grip of a massive run-up in electricity pricing due to natural gas issues with Russia, signed 12GW of capacity. Asia actually saw a significant drop from 2020, with just 2GW in 2021.

BloombergNEF reports that most of the capacity was solar power. Amazon and Microsoft led the procurements with 38% of the total, and 8.2GW of that capacity was solar power.

All of these record purchases occurred despite steadily increasing pricing in the solar industry. LevelTen Energy’s recent “Q4 2021 PPA Price Index” shows prices increasing 5.7% to $34.25/MWh.

However, the price increases varied by region. For instance, California’s CAISO stayed flat, while PJM & SPP increased 15% and 15.1%, respectively. Year-over-year pricing increases were immense, averaging 12.1% for all US regions. Texas’ ERCOT region saw the lowest increase of 6.9%, while SPP prices were up more than 20%.

A LevelTen developer survey suggests that the price increases began in early 2020 due to increased demand, macroeconomic fluctuations, supply chain issues, and a confluence of other factors.

One might suspect that the increases in global electricity pricing are driving the ever-increasing demand for solar, but BloombergNEF suggests otherwise – and its data follows. It reports that 67 companies joined the RE100 last year – making for a total of 355 companies now committed to 100% renewable energy, totally offsetting their electricity use.

Of course, when we review the chart at the top of the article, it becomes apparent that corporate procurement volume had already been increasing at a consistent rate. Large increases began long before the solar hardware price increases in 2020 or the electricity pricing increases in 2021. For US solar developers, it might speak positively on the opportunity to continue selling solar power projects at pricing that pays respectable development fees.

One final factor worth considering: renewable procurements in the United States may be motivated in part by our increasing exports of US Liquid Natural Gas. According to the US Energy Information Administration, these exports have led to today’s higher natural gas prices, as a result of the country's exposure to global pricing of the fuel.