Solar power purchase agreement (PPA) prices in the U.S. rose by a modest 0.3% quarter-over-quarter in the fourth quarter (Q4) of 2024, according to LevelTen’s Market-Averaged Continental Index.

A steep drop in Alberta Electric System Operator (AESO) largely muted the upward price movement. Removing AESO, the rise in solar PPA prices was a more substantial 3.3% quarterly rise across the U.S.

Despite uncertainty in the PPA market, growing energy requirements from data centers continued to fuel clean energy demand in 2024, according to the report.

LevelTen’s P25 Price Index represents the 25th percentile PPA prices.

Source: LevelTen

The LevelTen report said that the increase in solar pricing in the U.S. may be related to uncertainties around tariffs, tax credits, and transmission build-out. However, PPA counterparties are using contractual terms that can account for an array of policy risks that may or may not materialize during 2025 and beyond. 

Wind PPA prices
The P25 wind prices rose 3.3% QoQ and 13% year-over-year (YoY) in Q4.

Source: LevelTen

The report said that higher interest rates from the U.S. Federal Reserve have posed significant challenges to wind project development over the last few years. This hurdle is in addition to supply chain issues and lingering inflationary difficulties.

It further added that President Donald Trump’s advocacy to end offshore wind development and uncertainty about the future of wind power projects may have contributed to rising wind PPA prices. Analysts are doubtful about the tech space continuing to compete for wind capacity because of the AI sector’s constantly growing energy needs.

Regulatory Uncertainty

While the U.S. election results have raised concerns about tariffs and the future of the Inflation Reduction Act (IRA) tax credits, a complete repeal of the Act is unlikely due to massive investments released into Republican districts. The industry is also optimistic about permitting reforms to hasten project development.

The report said that the PPA market has grown accustomed to accounting for tariffs directly in PPA prices or through tailored contractual terms. Analysts believe that the PPA market can successfully adapt to multiple market conditions.

Renewables Demand Grows

Despite the regulatory uncertainty, the U.S. industry continues to buy clean energy and is likely to continue until a material policy shift occurs. This purchase is driven by continued electrification and growing demand for data center power.

The report said that uncertainty around tariffs and tax credits can be addressed by including contract terms that allow PPA price adjustment or commercial operation date delays based on specific criteria.

Analysts suggest signing PPAs quickly to avoid future complexities, especially for small buyers.

The report stated that due to uncertainties, the market will likely shift further in favor of large, sophisticated buyers who can procure quickly and at scale

Future of Clean Energy

Analysts noted that Trump’s first term witnessed considerable growth in the utility-scale renewable energy space without IRA support.

They also said that some IRA tax credit provisions may be altered in various ways or even removed, even if a complete IRA repeal is unlikely.

Following years of fluctuation in the energy market, PPA prices in North America were stable during the Q1 of 2024. P25 solar and wind PPA offer prices increased less than 1% during the quarter, according to a recent report from LevelTen Energy.

The national P25 solar PPA prices in the U.S. in Q4 of 2023 rose 3% compared to Q3, while P25 wind prices increased 5%.