Global Renewable Energy Prices Soar Due to High Demand and a Chaotic Supply Chain

April 13 (Reuters) – Wind and solar power prices in major world markets have soared nearly 30% in a year as developers grapple with chaotic supply chains and soaring costs for everything , from shipping to parts to labor, according to a report on Wednesday.

Contract prices for renewables have jumped 28.5% in North America and 27.5% in Europe over the past year, according to a quarterly index from LevelTen Energy that tracks deals, known in the industry under the name of power purchase agreements (PPA).

In the first quarter alone, prices rose 9.7% in North America and 8.6% in Europe, LevelTen said.

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Economic, logistical and labor market disruptions during the coronavirus pandemic have worsened since the Russian invasion of Ukraine, reversing a decade of falling costs for the renewable energy sector.

There is a risk that higher costs will slow demand growth at a time when the United Nations has called for faster expansion of clean energy to avoid the worst effects of global warming.

“We always have to keep our foot on the gas here,” LevelTen vice president of energy market Rob Collier said in an interview.

Compounding challenges in North America, the sector is unsure whether U.S. lawmakers will extend tax breaks for renewable energy installations, under President Joe Biden’s climate change agenda. The developers are also concerned that a US Commerce Department investigation launched this year could lead to tariffs on solar panel imports from Asia, which would increase costs.

“There are just unsolvable issues right now with our supply chain,” Reagan Farr, chief executive of US solar developer Silicon Ranch, said in an interview.

In Europe, the war in Ukraine has led governments to try to reduce dependence on Russian natural gas, which has further stimulated strong demand for renewable energy.

The war was “the last straw for a market where there was already a lot of price tension,” Oscar Perez, a partner at Spanish fund manager and renewable energy developer Q-Energy, said in an interview.

Higher renewable energy costs in Europe, along with the continent’s aggressive climate policies, are expected to boost the appeal of more expensive technologies like green hydrogen and biofuels, according to Raymond James analyst Graham Price.

So far, the price spike hasn’t dampened demand, LevelTen said. In a company-led survey of 21 sustainability and energy advisors, 75% said their clients accelerated or maintained their procurement plans, according to the report.

“It’s not about demand,” said Luigi Sacco, head of PPA creation at Milan-based Falck Renewables. “The demand is there but the supply is struggling a bit in several markets.”

One of the factors attracting buyers to renewables is soaring fossil fuel prices.

“The ready alternative to renewable power generation right now is gas, and gas prices have also gone up 100%,” Farr said. “So you choose your poison.”

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Reporting by Nichola Groom in Los Angeles and Isla Binnie in Madrid; Editing by David Gregorio

Our standards: The Thomson Reuters Trust Principles.

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