Worldwide, the cost of generating renewable energy continues to decline. In April of 2016, BNEF reported record-low electricity prices for solar power. By October of 2017, every single bid received for a Saudi Arabian solar project was even cheaper than that. And in 2018, prices have continued to drop, inching renewable power closer to its predicted parity with established sources such as coal and gas.
Prices for U.S. wind and solar are particularly attractive thanks to the Production Tax Credit (PTC) and Investment Tax Credit (ITC), federal subsidies that have further reduced the cost of these technologies. Though the ITC enjoys a permanent 10% credit for the foreseeable future, the PTC is already on a phase-out schedule. This leaves limited time to execute wind power PPAs before the tax credit expires.
For companies who want to see the best possible wind power pricing in the U.S., this constrained timeline makes 2018 the key window to initiate renewable PPAs. Wind power PPAs should ideally be signed by the middle of 2019 to safely qualify for the full value of the PTC. Considering the time required to vet options, gain internal buy-in, and negotiate terms, focusing efforts on identifying opportunities in 2018 will be critical to companies who wish to secure this value.
Companies from a wide range of industries have signed deals in order to capture this value. From Fifth Third in banking to Cummins in manufacturing to Brown-Forman in food & beverage, it is clear that PPAs are a solution worth exploring no matter your company’s size or sector.
All factors considered, subsidy or no, wind and solar power prices are dropping precipitously. Even after the PTC sunsets in the U.S., renewable generation will continue to become more competitive with traditional fuel sources. The end of the PTC is by no means a signal of an ending era; the global transition to a low-carbon economy is inevitable.
To learn more about why companies are choosing power purchase agreements and how to capture the fullest value, we invite you to download our white paper, The Economic Case for Renewable Energy.