No end in sight for price hikes as US wind power buyers line up

There is no end in sight for US wind power price increases amid strong market demand and rising project costs as developers face an array of federal policy challenges, according to a new LevelTen Energy report.

Yet, there is a "frenzy" of procurement activity as buyers compete for a finite amount of tax-credit-eligible project capacity.

P25 PPA offer prices – the most competitive 25th percentile of total PPAs – rose nearly 5% in the third quarter and 14% this year through September, versus a 3.1% annual inflation rate.

Offer prices are from projects that are currently under development and posted to LevelTen’s marketplace or were issued in response to requests for proposals run via its platform.

The report’s data set comprises the top six organized US power markets – Caiso, Ercot, Iso-NE, Miso, PJM, and SPP, and Canada’s Alberta Electric System Operator.

Counterparties, in turn, are increasingly employing price adjusters and indexation in their contracts with sellers to allow for re-opening of the PPA price after contract signing.

These mechanisms allow prices to flex up or down within agreed-upon ranges should certain events come to pass, according to the report.Cost and risk-sharing looms larger in future power supply contract negotiations.

LevelTen analysts highlighted that wind developers face “very real challenges” stemming from Republicans’ partisan Big Beautiful Bill that President Donald Trump signed into law on 4 July, and his administration’s fluctuating trade policies.

The law significantly shortens the runway for wind projects to qualify for federal tax credits, ends the wind manufacturing tax credit in 2027, and creates complex foreign entity of concern (FEOC) rules that take effect at the start of next year.

The Department of Treasury subsequently eliminated the “5% safe harbour” option for wind projects to satisfy the start-construction tax credit eligibility requirement.

A LevelTen survey of developers showed 60% had planned to use this approach which allowed them to spend 5% of total anticipated project costs to qualify.

“Eliminating this tool disrupts another fundamental piece of the energy transition, and adds even more upward pressure on PPA prices,” the marketplace operator said.

The new rules left them with one option: conducting “physical work of a significant nature,” with substantial ambiguity left with respect to how these requirements would be enforced.

The law “has spurred a frenzy of development and procurement activity, as developers look to safe harbour projects by hitting key new development milestones, and as buyers compete for a finite amount of tax-credit-eligible project capacity,” notes the report.

While the law “certainly brings imposing challenges for the industry,” LevelTen analysts said “many developers” they have spoken with have relayed a strong ability to safe harbour material portions of their project pipelines.

This is helping to build a "bridge" of projects with tax credit access beyond the 2028 tax credit "cliff" imposed by the law. LevelTen did not identify them.

It said developers are working fast to safe harbor as many projects as they can, helping to bolster the future supply of tax-credit-eligible projects for PPA buyers.

“But these efforts will preserve only a finite amount of planned capacity, meaning buyers that see PPAs as part of their multi-year strategy must avoid complacency at all costs,” the report said.

As time progresses, risks related to pending FEOC rules will add to development costs, particularly for smaller and mid-sized developers without deep in-house legal expertise and under pressure to diversify supply chains away from China.

“Of course, only a limited number of planned projects will be able to begin construction in time to secure tax credits — without which, PPA economics will move into unknown, and undoubtedly more expensive, territory,” the report noted.

Further adding to costs – and risks - is the administration’s tougher permitting criteria for projects on US lands and those on private property that require federal permits.

Tariffs on metals, minerals, and essential project components, meanwhile, layered on top of country-specific tariffs, “are applying broad upward pressure to development costs,” the report said.

It warns an ongoing administration investigation into critical minerals may add further to costs for wind project components

For those wind developers who successfully navigate these challenges, “there should be solid buyer appetite,” especially from technology companies and data centre operators looking for clean power that delivers during night-time hours when wind availability is often best.