Clean Power Solar Record Low Prices

Published on February 23rd, 2016 | by James Ayre

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Palo Alto, California, Approves Solar PPA With Hecate Energy At $36.76/MWh! (Record Low)

February 23rd, 2016 by  

The city council of Palo Alto, California, has just approved a power purchase agreement with Hecate Energy for $36.76 per megawatt-hour, or 3.7¢/kWh — perhaps the lowest price paid for grid-scale solar energy to date.

Palo Alto

The proposed deal will see Hecate Energy provide electricity generated by its 26 megawatt (MW) Wilsona Solar project — to be located outside of Los Angeles, near Palmdale — to the city via a 25-year power purchase agreement (PPA) with options for three 5-year extensions (up to 40 years total). The deal marks a roughly 47% drop on contract price as compared to the cheapest solar PPA that the Palo Alto city staff had previously signed.

It’s unclear at this point what the total in subsidies comes to, but the following chart produced by CleanTechnica shows how this record-low bid compares to other low bids publicly announced in the past few years:

Solar Record Low Prices


 

The Wilsona Solar project is currently expected to begin providing electricity in 2021 — with around 75,000 megawatt-hours (MWh) of electricity currently expected to be delivered during the first year of operation.

The deal would be the cheapest solar PPA to date, according pv magazine. Here’s more via their coverage:

“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.

The potential contract is slated to be voted on by the full Palo Alto City Council on March 21st.

Top Image via Shutterstock

 
 
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About the Author

's background is predominantly in geopolitics and history, but he has an obsessive interest in pretty much everything. After an early life spent in the Imperial Free City of Dortmund, James followed the river Ruhr to Cofbuokheim, where he attended the University of Astnide. And where he also briefly considered entering the coal mining business. He currently writes for a living, on a broad variety of subjects, ranging from science, to politics, to military history, to renewable energy. You can follow his work on Google+.



  • Matt

    “The Wilsona Solar project is currently expected to begin providing electricity in 2021” so this is a PPA for power they will start getting in 5 years. Why the long wait? In 2020 the year before they start getting power, this might not look like that great a deal.

  • Bob Fearn

    That’s nothin’. Here in Canada we are building a billion dollar dam with hundreds of millions in distribution costs and the electricity is going to cost only 10+ cents per kWh. So there!!

    • vensonata

      You are right. Lets get some solar happening here…or some off shore wind on the West Coast of Vancouver island where the wind exceeds Texas. By the way, the total power produced by that dam is 1.4 Gw, and is just about equal to the amount required for the compression of the natural gas to liquid for shipping around the world. So there goes that “clean hydro” into the maw of the carbon demon.

  • GCO

    26 MW of PV, 75 GW⋅h per year => equivalent of 7.9 hours per day at STC on average. Wait, what??

    This seems optimistic even with dual-axis tracking. Maybe 26 MW is the AC capacity, and the amount of PV is measurably larger…

    • vensonata

      That best you can get is 60 GWh per year from 26 MW according to PVWatts using premium panels with dual axis tracking. However if the price installed is $1.50 watt and 30% rebate then the price per kwh is 4 cents kwh. So they have made an excessively optimistic generation projection but probably a realistic economic projection.

  • JamesWimberley

    Big news, but the headline is wrong. The deal has been presented to the town council, but as the PV Magazine post makes clear, it has not yet been approved.

    • Jens Stubbe

      Read the article where it is stated. “The potential contract is slated to be voted on by the full Palo Alto City Council on March 21st.”

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      • JamesWimberley

        I did. The headline is what I said, and wrong. Headlines are more important than closing paragraphs.

  • Omega Centauri

    Begin delivilering power in 2021. This changes the calculus. Does it mean the federal subsidy will be greatly reduced, as it hits during the phaseout? Also Wilson appears to be banking on the expectation than solar built almost five years from now will be a lot cheaper than anything we can build today.

    • JamesWimberley

      Yes, there is something peculiar here. A solar farm can be erected in months. Add design, grid links, site preparation, financing and permits and you can get up to a year, 18 months at the outside. Delivery in 2021 is a bet on prices 48 months from now. It’s hard to see why the city should sign up so far ahead.

      The 40- year horizon is also strange. There are a very few panels that age still going strong, but they were a tiny niche product, made by a cottage industry of small firms basically selling to NASA’s and the Pentagon’s space programmes. The manufacturing process was not really comparable to today’s automated production lines in gigawatt-scale fabs. Current panels have output guarantees for 25 years. They will probably keep going to at least 30, but beyond that the company is guessing.

      • Omega Centauri

        Agree about the uncertainties, even about the fact that today’s panels are different enough techwise, that looking at decades old panels doesn’t tell you how long they will last.

        But I don’t think its not much of a bet on reliability and calculation of present value seriously discounts anything 20-40 years later, to the extent that it barely factors in. Its mainly a gamble that constructing a farm a few years from now will be cheap (cheap panels/mounts/inverters and less labor needed than today also). We all expect that to happen, but it isn’t in the bag yet.

        Maybe PaloAlto would rather shift the risk to the vendor, which this contract does. In fact that’s mainly what any longterm contract does, it shifts the risk from one party to another.

        Is the quoted price at the PV farm, or at the PaloAlto substation? There is a few hundred miles of transmission, and the grid operator isn’t going to provide that service free of charge.

    • Shiggity

      It’s more that he’s banking on the reliability. People are growing tired of constant fossil fuel price fluctuations.

      Long term investments require steady markets. What is steadier than the sun rising?

  • stephan011

    Wouldn’t the unsubsidized price be $36.76/.7 = $52.51? (5.25 cents/kWh) are there other subsidies in the mix?

    • vensonata

      No unsubsidized price is given. And no explanation either.

    • Nolan Thiessen

      The PPA starts in 2021. By 2022 the US solar subsidy will be 10%.
      So 36.76/.9 = $40.84
      Since it’s a PPA for 6 years from now and it only takes a year or two to build a solar plant, it looks like the company is taking a gable on future solar costs.

      • stephan011

        Good point, the step-downs are different though: “Projects that start construction by 2019 will receive the current 30% ITC, while projects that begin construction in 2020 and 2021 will receive 26% and 22%, respectively. All projects must be completed by 2024 to obtain these elevated ITC rates.”

        Guessing they’ll start in 2020 (or possibly 2019 depending on how cost projections work out).

        Actually, the more I think about it, the more this makes sense, Solar has been dropping ~10% year, so ~4 years of falling costs before work starts. I can see this working out for them.

        The 40-year timeline doesn’t seem that risky either. Solar panels have been lasting longer than anticipated, and if you have to replace a few due to failures or add a few to boost waning efficiency, that seems like a marginal cost.

        • Nolan Thiessen

          My mistake. I thought the subsidies were based on the year the power was generated, not the year the plant opened.

        • Calamity_Jean

          I can see why the company wants to wait a while to start the project, but why is the city willing to wait so long to start buying super-cheap power? Unless they are in the middle of another PPA that they can’t get out of until then.

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