“It’s a pretty bold statement to announce this at this particular time.”
Last week, Intersect Power and Austin Energy, one of the country’s largest publicly owned electric utilities, announced a 150-megawatt solar power purchase agreement at $10 million to $12 million annually for 15 years.
It’s the lowest solar PPA price the U.S. has ever seen.
While the historic-low price makes the agreement newsworthy on its own, the announcement is more notable given the current climate of uncertainty swirling around the industry because of the Section 201 trade case brought by Suniva and SolarWorld. That uncertainty contributed to Q3 being the U.S. solar industry’s smallest quarter in two years in terms of deployments.
“It’s a pretty bold statement to announce this at this particular time,” said GTM Research analyst Colin Smith. “It shows, particularly on Austin Energy’s part, a real confidence in the industry of what the low cost of solar energy can still provide them.”
The Texas-based utility did not offer exact details on the megawatt-hour price for the agreement. But based on some back-of-the-envelope calculations, Smith estimates the cost hovers between $23.50 and $27.25 per megawatt-hour. It could even be as low as $21 per megawatt-hour.
“It’s low enough that it’s kind of shocking,” said Smith.
Record-low prices arriving first in Texas makes sense. It’s among the country’s top 10 states for solar installations. It’s also generally one of the cheapest regions in the country for large-scale renewables, according to Smith, because of the price for land acquisition, interconnection and other factors.
The price going so low there suggests other regions of the country, especially large states with developed utility-scale solar markets like North Carolina and California, could soon see similar prices.
“[Texas] has a lot of factors in its favor to allow it to hit a historically low price,” said Smith. “But this also means developers in other regions should be on a track to lower prices at a similar clip.”
The rock-bottom price in Austin puts a deal inked in May between NextEra Energy Resources and Tucson Electric Power for a 100-megawatt solar array in second place. Arizona’s sub-$30 per megawatt-hour PPA, with a $15 per megawatt-hour energystoragecomponent, claimed the historic spot in May. In just a few months, another upset may take away Austin’s title.
The price also narrows the cost gap between solar and wind, upping the viability of pairing these resources to balance the grid during on- and off-peak periods.
Most of all, both the price and the 15-year timeframe can be seen as a vote of confidence in an industry experiencing a great deal of tumult.
Earlier this month, a joint report from GTM Research and the Solar Energy Industries Association found the solar industry shrank on both a quarterly and annual basis in Q3. Another December GTM Research report found that average fixed-tilt utility-scale solar prices inched back up over the SunShot price target of $1 per watt.
Those cases are just snapshots of a slight chill in a rapidly growing industry, but the Austin price may offer the industry a sorely needed shot in the arm as it heads into 2018. The ITC offered its final recommendation to President Trump November 13, and the administration has until late January to respond.
“If we’re looking at this in a vacuum, and ignoring any political changes going on, any time we see a significant drop in PPA prices and we see a new low, it’s worth taking note,” said Smith. But, he added, “This is being announced at a time when a lot of offtakers are very uncertain about the future of U.S. solar.”
The deal is expected to bring Austin Energy’s mix to 51 percent renewables by 2020.