Higher capex intensity with a large geographical spread for onshore wind compared to solar PV

PPA prices are primarily defined by two factors: the costs of the projects and the power market prices where the project will be located. Solar PV and onshore wind projects generally have a much higher capital expenditure (capex) than operating expenditure (opex), and capex is therefore the main driver of project breakeven, together with the capacity factor, which determines the generation level, and together with the offtake price determines the revenue for the project.

The capex intensity of solar projects has declined significantly over the past decades due to major technological improvements and a significant increase in manufacturing capacity that allows for greater economies of scale. Capex intensity has dropped from a global average of more than $5 per watt in 2010 to an expected level of around $0.80 per watt this year. China dominates the manufacturing of solar PV components. More than 90% of the global manufacturing capacity for ingots, wafers, cells, and modules is located in China, meaning that most of the solar PV projects developed across the world have Chinese components. This allows projects to have similar capex intensity. As a result, the spread of capex intensity across the world is quite narrow, with the upper and lower quartiles varying on average less than 10% from the median (Figure 1). The range in 2025 hovers between $0.80 and $1.00 per watt and is expected to remain stable for the next five years. China, India, the UAE, and Saudi Arabia are markets where the average capex intensity is lower than the quartile 1 level, while the US and Japan are examples where capex intensity is significantly higher than the quartile 3 level.

Wind capex intensity saw a large increase between 2020 and 2023 due to inflation and higher interest rates to which manufacturers were exposed. This led the capex intensity to increase from a global average of $1.14 per watt in 2020 to $1.59 per watt in 2023. However, costs have stabilized and are expected to remain at this higher level out to 2030.  Wind manufacturing capacity is more diversified than that of solar PV, leading to a higher spread of capex intensities across the world, depending on the origin of the components and where the projects are located. Manufacturing costs of Western original equipment manufacturers (OEMs) are higher than for their Chinese counterparts, leading development costs of projects in Western countries to be generally higher than in Asia. The median capex intensity for onshore wind has increased above $1.50 per watt over the last few years and is expected to remain roughly at this level. However, the upper quartile is forecasted to increase above $2.00 per watt, increasing the spread with the median to more than 30% by 2030. Also, in this case, the capex intensity in China is significantly lower than the quartile 1 range, being a clear outlier compared to all other markets, while Australia and the US are outliers in the other direction.

Cost of capital and resource potential have the most impact on breakeven prices

Across all 35 markets analyzed by Rystad Energy, the final breakeven price with sensitivities for capex, opex, discount rate, and capacity factor are presented in Figure 2. Both utility-scale solar photovoltaic (PV) and onshore wind power projects are highly sensitive to discount rate assumptions (or cost of capital). In power markets where the cost of capital is higher, such as many developing nations, renewable energy projects face a significant disadvantage, especially when those regions do not possess abundant solar or wind resources.

Capacity factors for solar PV and wind energy can vary widely between different markets and even within regions of the same market. As a result, breakeven power prices fluctuate substantially. For solar PV, breakevens can range from $6-8 per MWh, while for onshore wind, the range is between $9-11 per MWh. These figures reflect cases where the output is 15% higher or lower than the respective base cases, as illustrated in Figure 2. The capital-intensive nature of renewable energy projects is evident in these outcomes. Market rankings previously discussed indicate this issue may be particularly significant for onshore wind compared to utility-scale solar PV when evaluating projects across different markets.

Operating expenditures, conversely, have the least impact on breakeven prices, as neither energy source requires any fuel inputs. For solar PV, especially, changes to opex assumptions have minimal effect on the overall project economics.

Much lower capture rates for solar PV than for onshore wind

The second primary factor that determines the PPA price level, in addition to project costs, is power prices in the spot market, or more specifically, capture prices. Wholesale power prices exhibit significant regional variations across different electricity markets, driven by generation mix, grid infrastructure, and demand patterns. Within this group, California Independent System Operator (CAISO) exhibits the lowest wholesale prices, while Australian regions like New South Wales and Western Australia are positioned at the higher end.

In this analysis, we estimated capture rates to reflect the average price actually earned as a share of the market prices. We estimated the capture rate for each technology by examining the historical relationship between the share of solar or wind in power generation and their corresponding capture rates.

Solar tends to have a lower capture rate than wind, as its generation is concentrated during the same hours, which compresses revenues through competition. This is often referred to as the cannibalization effect. Storage is expanding, but its growth has not kept pace with the rapid rise of solar and therefore does not yet provide sufficient flexibility. In New South Wales, this has contributed to solar capture prices falling to around 40%. Several high solar penetration markets across the world are also seeing yearly average capture rates in the range of 40-60% or are expected to reach this level in the coming years. There are very few markets globally where onshore wind sees a capture rate below 80%, and very few markets are expected to go significantly below 70% in the coming years as well. So even though breakeven prices for solar PV are lower on average across most markets, making solar more cost competitive, the offtake from the spot market can be much lower, having a significant impact on determining PPA prices.

Solar PV prices are on average lower than for onshore wind globally

The full distribution across the 35 markets analyzed in this report, for both onshore wind and solar PV, across all scenarios with a start-up year 2025, is shown in Figure 3. The PPA prices for solar PV are, on average, lower than for onshore wind, and the lowest overall PPA price is in Saudi Arabia for the solar PV low case, with a PPA as low as $16.3 per MWh. Middle Eastern countries, together with India, China, CAISO, Morocco, and Spain, all have low cases for solar PV below $25 per MWh, either due to very low costs or very high capacity factors, or a combination. In the case of the UAE and Saudi Arabia, which top the charts, they have both among the lowest costs and best conditions, making these projects very cost-competitive. Among the highest prices, we find a majority of onshore wind projects, all within the high case (high costs, low-capacity factor, high discount rate), including markets like Malaysia, Queensland (Australia), Germany, and Italy.

This research is based on the new PPA Analysis Dashboard, part of the Power Macro Solution. This comprehensive tool provides power purchase agreement (PPA) price forecasts for the 35 largest solar and onshore wind markets globally, offering full transparency and flexibility for all relevant inputs, as well as detailed explanation of our methodology. Request a demo to learn more.