A look at break-even costs and capture prices
A recent chart from S&P Global Commodity Insights provides interesting insights into the break-even estimates for 10-year Power Purchase Agreements (PPAs) starting in 2026. These estimates show the average forecast prices for pay-as-produced PPAs in the period 2026-2035, which are necessary to cover the costs of new construction, operation and financing of new plants.
Strong price differences for solar, more stable wind prices
Unsurprisingly, there are significant price differences between different countries for solar energy. In Spain, the break-even price for a solar PPA is only €38/MWh, while in Finland it is significantly higher at €115/MWh - not least due to the considerable differences in solar irradiation.
Wind power prices, on the other hand, are more stable and range between €60 and €80/MWh. This indicates that wind energy in Europe tends to be less location-dependent than solar energy.
Comparison with the capture prices
However, the key question is: How do these prices compare with the capture prices? These reflect the real market price that renewables actually achieve, depending on supply, demand and market conditions.
For solar, the capture prices in 2024 were:
- 42 €/MWh in Spain
- 47 €/MWh in Germany
- 39 €/MWh in France
This means that the capture prices for France and Germany are already below the forecast break-even costs for 2026-2035 in 2024. A clear indication of the challenge for solar PPA projects in these countries.
Open questions for the future
Several exciting questions arise from this development:
Will the downward trend in solar capture prices continue?
- With the current expansion plans, it is likely that capture prices will continue to fall. Increasing supply is depressing market prices.
Can increasing consumption and storage technologies compensate for the fall in prices?
- Greater integration of storage solutions could help to stabilise the price level.
Will demand for solar remain high?
- Will there continue to be strong interest in solar projects - both through private PPAs and government-subsidised models such as Contracts for Difference (CfD)?
The role of storage - how much is needed?
It is increasingly likely that solar energy will be increasingly combined with storage technologies to increase capture rates. The key question is: how much storage is needed to keep solar economically attractive?
This will remain a dynamic development that depends on technological advances, cost developments and market prices. One thing is certain: The energy industry is changing and flexibility will be crucial to maximise the opportunities of renewable energy.
