Dive Brief:

The Austin City Council last week approved power purchase agreements (PPAs) for 300 MW of utility-scale solar for Austin Energy, its municipal utility. The $33 million is thought to be the lowest price ever paid for Texas solar.

The approval allows the muni to negotiate with East Pecos Solar for a 118 MW facility and with several unnamed developers for 182 MW more in separate solar projects. While prices are not yet final, the utility says they will be less than $0.04/kWh, significantly below the $0.045/kWh PPA signed with Recurrent Energy in 2014 for 150 MW of utility-scale solar.

The Council continues to debate whether Austin Energy should purchase 300 MW of additional solar to meet a 600 MW deadline set for 2017. Some want the city to delay the purchase until solar prices drop further.

Dive Insight:

While some argue the City Council should wait for further solar procurement because prices are likely to fall further, other solar advocates say the city should act before the 30% federal investment tax credit (ITC) reverts to 10% at the end of 2016.

Recent studies have shed light on just how significant the scheduled drop in the ITC could be. Modeling by the Lawrence Berkeley National Laboratory produced a levelized PPA price of about $0.043/kWh for utility-scale solar in America with the 30% ITC, but that price rose to about $0.054/kWh with only a 10% ITC.

Two council members voted against the PPAs on the grounds that they could increase the average customer’s bill. An Austin Energy staff analysis found the solar purchases could increase the average residential customer’s annual fuel charge by $3 to $7. Austin’s commercial customers, however, could see bill much larger bill increases.

Along with approval of the PPAs, city lawmakers also voted to give Autstin Energy more time to negotiate a deal on the second batch of solar contracts before a final vote scheduled for Oct 15.