US green energy deals plunge as Amazon stays away from market
Contributing factors included the absence of the top buyer in 2022, rising PPA prices and regulatory concerns in Texas
US clean energy procurement activity declined 47% across all technologies in the first half of 2023 versus a year earlier led by corporates, the biggest market segment, according to latest numbers from American Clean Power Association (ACP).
A big factor was the absence of Amazon, which procured 6.5GW of capacity in 2022, the most by a corporation in any calendar year and more than three times the amount of PPAs signed by runner-up Meta. The technology sector continues to dominate US corporate procurement activity.
Corporate buyers rely primarily on PPAs which accounted for 51% of offtake mechanisms for 9.41GW of clean power capacity that came online from January through the end of June.
In the first half, corporate PPA announcements fell 63% versus a year earlier, while those for utilities rose 49%.
The report said the downturn in corporate PPAs possibly indicates that clean power buyers are “exercising caution and waiting for increased market stability before scaling up their procurement efforts.”
The continued rise in PPA prices since first quarter of 2021 is likely a factor. Year-over-year, the blended national corporate PPA price index increased 28% to $53.55/MWh, according to the report. They also rose 6% quarter-over-quarter.
Solar, which comprises most deals, saw its national average price decline for the first time in the second quarter, down 1% from January through March. An exception was in ERCOT in Texas, the nation’s number two utility solar market, where solar PPA prices surged 14% last quarter due to “regulatory uncertainty,” said the report.
This is in apparent reference to the state’s turbulent legislative session earlier this year in which a slew of anti-renewables bills introduced by conservative Republicans. Most failed to pass.
Several did such as HB1500 that will take effect on 1 September. This provides up to $1bn each year in so-called performance credits to dispatchable generators for availability during times of high demand. This is funded by ratepayers.
LevelTen Energy, which manages the world’s largest online hub for renewable energy buyers, sellers, advisors, asset owners, and financiers, noted that this provision will hurt clean energy projects most as they are generally sited in more rural regions far from population centres.
SB627 provides robust financial support for dispatchable plants via a $7.2bn fund made up of zero-or low-interest loans, grants, and completion bonuses for unit upgrades.
Lastly, HB5 excludes solar, wind, and battery storage from a programme that allows school districts to cap for a decade the appraisal value of the land in their district that developers were seeking to construct on in exchange for related investments and jobs.
All this will raise interconnection costs and the tax burden of projects. Developers are certain to pass some of these down to offtakers by increasing PPA prices.
Looking ahead, outside analysts anticipate corporate procurement will begin rebounding in the second half and in 2024 as more clean power becomes available as the industry responds more broadly to generous federal tax credits in last year’s climate law.
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