3 Factors Causing Price Increases for Solar PPA Deals in 2023

According to LevelTen, the current cost of solar PPA deals has increased 8.2% in Q4 2022, up from Q3, climbing to an average of US$45.66/MWh. In the first quarter of 2023, PPA costs climbed higher– a 6.6% increase.  A recent report by LevelTen sought to examine the reasons for the increase, uncovering key insights into clean energy demands, supply bottlenecks, and other factors that contribute to skyrocketing costs. 

In this article, we’ll relay some of these findings, along with current events, to help you understand the financial woes facing the solar industry. Let’s take a closer look.

1. Demand Outpaces Supply – and Ethical Concerns Remain Crucial

Amidst a time of rising consumer and governmental demand for ethical supply, the Uyghur Forced Labor Prevention Act (UFLPA) has continued to bottleneck solar suppliers with new and more rigorous sourcing requirements. The act seeks to prevent the use of modules and components imported from Xinjiang Uyghur Autonomous Region of the People’s Republic of China in U.S. solar projects, under the presumption that these parts come from work camps exploiting ethnic minorities. 

However, according to PowerMag,  “more than 90% of the world’s ingots and wafers (made from polysilicon) are produced in China, and 80% of solar panels going into both residential and commercial projects in the United States come from abroad,” and as such, the UFLPA has wreaked havoc on supply. As of March, imports were on a much-needed upswing as Reuters reports, hopefully indicating easier futures for suppliers. 

2. IRS and IRA Guidance Came Too Late

The IRS recently clarified the eligibility for a 10% tax credit benefitting projects in fossil fuel-producing communities. But, the guidance came too late, says LevelTen Energy Marketplace VP Rob Collier.

According to UtilityDive, while the credit may alleviate financial pressures and potentially increase the total number of projects, “[n]egotiations for some projects may be delayed while developers wait for additional forthcoming guidance on which adders they will qualify for.” 

LevelTen’s recent survey, as cited in UtilityDive, states that “91% of North American energy developers believe their projects will be impacted by the IRA’s tax credit provisions” and the aftermath of the late-game announcements may stall projects until specifics can be hammered out. 

3. AD/CVD Tariff Woes Are A Bottleneck

The antidumping and countervailing duty (AD/CVD) has been an ongoing source of chaos for the solar industry, raising further concerns over the availability of certain solar modules. 

In a press release, the U.S. Department of Commerce states that they “[…]examined a complaint alleging that eight solar companies that manufacture solar cells and modules manufactured the components in the PRC, then sent those cells and modules to Cambodia, Malaysia, Thailand, and/or Vietnam for minor processing before being exported to the United States.  Such actions amount to an effort to evade the existing antidumping duty (AD) and countervailing duty (CVD) orders on solar cells and modules from the PRC.”

The Department is reportedly seeking retroactive duties from these companies come 2024. 

At SPURR, we keep a finger to the pulse of utility markets, helping ensure that our customers remain agile and able to procure the clean energy solutions crucial to their success. We will continue to monitor market conditions and take action for our customers–subscribe to our email list to stay informed on solar, wind, natural gas, and more. 

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