Solar Less Than 5¢/kWh In Austin, Texas! (Cheaper Than Natural Gas, Coal, & Nuclear)

March 13th, 2014 by Zachary Shahan

Here’s a milestone to mark. Solar power is apparently going to be sold to Austin Energy for a tiny bit less than 5¢/kWh under a new 25-year power purchase agreement (PPA) with SunEdison. Austin Energy says the deal will even lower electric rates a bit.

It’s from no small project either. It’s from two solar power plants totaling 150-megawatts of capacity — a 350,000-panel, 100-megawatt facility; and a 150,000-panel, 50-megawatt facility nearby.

Oh, by the way, this wasn’t the only proposal Austin Energy received. It beat out about 30 other solar power proposals. Needless to say, competition is a brewin’ in Texas!

“Austin Energy is poised to sign what could be the world’s cheapest solar-power deal,” Marty Toohey of statesman.com wrote.

“It’s the cheapest I’ve seen,” said Raj Prabhu, the CEO of Mercom Capital Group, an Austin-based energy consulting group that monitors the industry nationally. He said he isn’t familiar with the details but added, “This seems to be new territory.”

“It is certainly at the very low end of the prices I have seen,” said Jurgen Weiss, an energy economist with the Brattle Group, an international consulting firm that advises the Electric Reliability Council of Texas. “As many had predicted, we’re entering a time in which, with some caveats, solar presents quite an attractive alternative to conventional sources.”

Lowest price yet for solar?

I have a hard time believing that’s the lowest solar power has gone for anywhere in the world, but it may be the lowest in the US if you remove state subsidies from other projects.

We reported last February on a PPA in New Mexico in which First Solar was selling electricity for 5.8¢/kWh. That’s the lowest I think I have seen. However, GTM Solar Analyst Cory Honeyman says that “new PPAs signed in North Carolina fetched prices for less than 7 cents per kilowatt-hour.” The notable difference in the New Mexico and North Carolina projects, as implied above — they took advantage of in-state subsidies for solar. That’s not the story with this Texas deal.

SunEdison project beat natural gas, coal, and nuclear on price

If you removed the ITC (a federal tax credit for solar), the cost would probably be about 8¢/kWh. Still, that’s not bad. Austin Energy’s 30-year LCOE estimate for natural gas was 7¢/kWh, while the estimate for coal clocked in at 10¢/kWh and the estimate for nuclear at 13¢/kWh.

Only wind — 2.8¢/kWh to 3.8¢/kWh — was lower.





Things change fast

I remember watching a utility company CEO roundtable a few years ago that featured solar leaders in the utility arena. Larry Weis, General Manager of Austin Energy, was on that panel. So, he was considered a good guy in the solar space. However, he was adamant a number of times that solar was expensive and the cost had to come down for solar to become competitive.

In 2009, Austin Energy actually agreed to contract for 16.5¢/kWh for power from a solar project in the Webberville, TX.

Clearly, things have changed fast. (Of course, anyone who reads CleanTechnica already knows that.) Still, I think it’s hard even for those in the industry to keep up with solar prices.

Here’s another big note regarding this new PPA: the original Request for Proposals for this Austin Energy contract was for 50 MW. Why would Austin Energy up that to 150 MW after getting the bids? I think you know why.

Don’t forget, this is peak power!

One final thing worth pointing out: solar power produces electricity at peak demand. That is very high-value electricity. The fact that bids are coming in below 5¢/kWh is huge.

“At this price, it’s a game changer, not just for Austin Energy but for the future of electric generation in Texas,” said Tom “Smitty” Smith, head of the Texas chapter of Public Citizen, an environmental watchdog group. “No state has more solar potential than Texas. Some states have places of more intense sunlight, but Texas has vast areas of dry, arid desert that are perfect for solar.”

Beating Targets — Big Time!

I lied. Here’s one more note: the US Department of Energy projected that the cost of solar would drop below 6¢/kWh before 2020.

Also, note that the deal is not final. It goes up for an Austin City Council vote on March 20. However, it looks like an obvious shoe-in.

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Image Credit: “Vibrancy” by Craig Hein, one of the Guitar town Austin art project Guitars on Congress Ave. as seen during the Formula One Fan Fest November 18, 2012. via Tricia Daniel / Shutterstock.com









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