Utility-Scale Solar PPA Price Trends - Berkeley Lab Report Analysis Part 3

Power Purchase Agreement (PPA) prices and Levelized Cost of Energy (LCOE) serve as critical indicators of utility-scale solar’s market progression. Drawing from Berkeley Lab’s “Utility-Scale Solar, 2024 Edition” report, HeatSpring instructor Tim Taylor explores the relationship between these metrics, examining how tax credits, regional differences, and market forces have influenced pricing since 2010. 

In case you missed Tim’s earlier segments, click to learn more about Berkley Lab’s findings on capital expenditure patterns and interconnection queues at the respective links. 

Follow along the transcript below.

Hey, everyone. Tim Taylor here again. In previous videos, I reported on the growth in utility-scale solar and the drop in utility-scale solar capital cost as described in a Berkeley lab report, which was released around the end of October. 

In this video, I’m going to hit what I believe to be a few major points of their analysis around PPA (or Power Purchase Agreement) prices.

Berkeley Lab is a great resource on utility-scale solar, and since it’s a government lab, all of their reports and data are publicly available. Head over to their website if you want to get more details about the summary of points in this video.  

One thing that Berkeley does is collect and compile information on LCOE (or Levelized Cost of Energy) and compares it to PPA (or Power Purchase Agreement) prices for projects that entered commercial operations that year.

Now the data shown in this video is for solar PV projects greater than 5 MW with no battery storage. With the LCOE, it computes the levelized cost of energy with and without tax credits, whether it be either a PTC (a production tax credit) or ITC (investment tax credit). 

A couple key points…

First, the significant drop in both utility-scale solar LCOE and levelized PPA prices is illustrated on this graph from 2010 until 2023. 

Second, the gap between LCOE with and without tax credits slightly widened in 2023 with new tax credits becoming available.  

Berkeley also observed that since 2016, the PPA prices and LCOE with tax credits have a fairly close tracking. For this reason, it suggests a pass-through of tax credits is occurring and there is a competitive PPA market. 

Then, last from 2021 until 2023, the levelized PPA prices for this sample of projects has been around $25/MWh.  

Another interesting chart from Berkeley Lab’s report is shown here, in which average levelized PPA prices are plotted by execution year, not for the entire country, but for different regions and the lower 48 states as a whole. I’ll reiterate that Berkeley Lab has access to a number of federal, state, and company data that they compile. 

First, the lower 48 generation-weighted average was $35/MWh in 2023, but that’s on a relatively small sample size of 7 PPAs. Second, this was up from the 2019 data showing $23/MWh. 

Third, there is some data on a regional level shown in this chart. In California ISO (CAISO) and non-ISO West in 2021 and later, PPAs were usually priced between $20 to $30/MWh, while for projects in other locations in the lower 48 were priced between $35 to $47/MWh.  

That’s it for this video. I’ll be talking about a few other key aspects of this report in future videos. To learn about transmission interconnections more, scan the QR code or head over to Heatspring. Thanks for watching!