Texas utility secures rock-bottom price for solar17. March 2014 | Global PV markets, Industry & Suppliers, Markets & Trends, Top News | By: Edgar Meza
Under the unprecedented agreement between Austin Energy and SunEdison, the utility will buy solar power for less than $0.05 per kilowatt hour.
Austin Energy in Texas is set to sign a deal expected to result in one of the lowest-priced solar power arrangements in the world.
According to a report by The Austin American-Statesman, the utility, owned by the city of Austin, has approved an agreement with SunEdison to buy electricity from two solar farms in West Texas at a price of just below $0.05 per kilowatt hour – considerably lower than the standard price for solar energy and less than a third of the price Austin Energy agreed to pay in 2009 for electricity from a smaller solar installation east of the city.
Raj Prabhu, CEO of energy consulting group Mercom Capital, told the newspaper that the deal was “the cheapest I’ve seen,” adding that it appeared "to be new territory."
The Austin American-Statesman also cited Jurgen Weiss, an energy economist with the Brattle Group, who added, "It is certainly at the very low end of the prices I have seen. As many had predicted, we’re entering a time in which, with some caveats, solar presents quite an attractive alternative to conventional sources."
The two solar farms comprise a 350,000-panel, 100 MW facility and a nearby 150,000-panel, 50 MW plant. Austin Energy declined to say where exactly the proposed project is in West Texas, saying the location had to be kept confidential for competitive reasons until the contract was signed.
Austin's city council is scheduled to vote March 20 on the 25-year contract, under which the utility would pay up to $21 million a year, depending on the plants' output. The installations will be able to power some 14,000 homes at peak output.
Austin Energy hopes to employ solar energy to help handle the increasing strain that the city’s growing population is putting on the grid during peak-demand times in the late afternoon and early evening.
The Austin American-Statesman notes that SunEdison's price is nearly identical to that of natural gas and even cheaper when the cost of building a gas plant is taken into account.
A number of factors contributed to the low price, according to the newspaper, including a federal tax credit that helped lower the original price from $0.08 per kilowatt hour to $0.05.
In addition, the city's large-scale purchase of solar energy as well as the utility's strong credit rating also helped to keep the price down, said Austin Energy General Manager Larry Weis.
"I think they're willing to take a haircut on price to have that steady income coming from us," Weis said, cited by the newspaper. He added that prices would probably not fall much further in the near future, partly because federal subsidies are set to be reduced in 2016.
Austin Energy had asked companies to submit proposals and about 30 offered prices near those of SunEdison, Weis said, adding that the company received a very good price.
Austin Energy expects the agreement to lower rates slightly for customers.
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