Last Tuesday a committee of the city council of Palo Alto, California, recommend approval of a power purchase agreement (PPA) with developer Hecate Energy for what may be the lowest price paid for power from a solar project to date: US$36.76 per megawatt-hour (MWh).
Hecate will supply the electricity from its 26 MW Wilsona Solar project, which will be located near Palmdale in Los Angeles County, California. Wilsona Solar is scheduled to begin delivering electricity in 2021, and the project is expected to deliver 75,000 MWh in the first year of service.
The PPA has a 25-year base term, with three five-year optional extensions to a total of 40 years. Palo Alto city staff note that the contract price is 47% lower than any solar PPA it has previously signed. The full Palo Alto City Council will vote on whether or not to approve the contract on March 21.
I have not seen a PPA for 40 years before, or a PPA for under 4 cents, Mercom Capital CEO Raj Prabhu told pv magazine. It might make sense for both parties: Very low clean power PPA for the city and a very long-term contract for the vendor which justifies the record low price.
Palo Alto city staff commentary supports the idea that the low price and long contract length are related. As of today, the green premium for a 40-year contract term is significantly lower than that of a 25-, 30-, or 35-year term, notes a staff assessment of the project.
News of this record low price PPA came around the same time as a global record, with Peru awarding a $48/MWh PPA to Enel Green Power last week. However, as the cost of developing solar projects in the United States is reduced by the 30% Investment Tax Credit, these two prices cannot be directly compared.
Correction: This article was corrected at 7:55 PM EST on February 22. A previous version stated that the contract had been approved, when in fact the contract was merely recommended for approval. The article has been changed to reflect this distinction.
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