Published on July 2nd, 2015 | by Zachary Shahan31
World’s Cheapest Solar Power Lands In Austin, Texas — Under 4¢/kWh! (Sort Of)
July 2nd, 2015 by Zachary Shahan
Update: I added the Lazard chart on levelized cost of electricity and the update below it in order to provide some context for those who don’t realize that 4¢/kWh (or even 5.71¢/kWh) is lower than the lowest LCOE for all other sources of electricity other than wind power.
Texans likes to be #1. Well, a lot of people like to be #1, but Texans are particularly known for this. For the time being, the Lone Star State can now lay claim to being #1 again with the cheapest solar power on the planet.
Not long ago, Dubai grabbed the title with a bid for a large solar project coming in under 6¢/kWh. As that article explains, that 5.98¢/kWh bid (now actually down to 5.84¢/kWh) shattered the previous record for the world’s cheapest solar power (or the world’s lowest solar power bid, since there is a slight difference). That article also noted that the second-lowest bid would have taken the record if the lowest hadn’t existed, showing that it wasn’t just a crazy anomaly from one developer. The Dubai solar bids were very exciting, and the talk of the industry for months, but records don’t last very long in the world of solar these days.
Austin Energy, the city of Austin’s utility, recently put out data on solar project bids for the utility’s 600 MW procurement plan. To show how competitive this landscape is, Khalil Shalabi, Austin Energy’s vice president of resource planning, noted that 7,976 MW worth of solar projects were bid in April in competition for this 600 MW.
But that only partly shows how competitive things have gotten. 1,295 MW of those solar project bids came in below 4¢/kWh! (Talk about shattering records.)
There is a difference between these bids and the Dubai one, of course — there are no subsidies for solar in Dubai, while these Texas solar projects can take advantage of the US federal tax credit for solar. But even accounting for the 30% tax credit, these projects would come in below 6¢/kWh (below 5.71¢/kWh, in fact). In other words, these do indeed represent the lowest solar power bids we’ve seen worldwide.
Update: For context, note that no other source of electricity production other than wind has a levelized cost of electricity (LCOE) below 5.71¢/kWh, or even below 6¢/kWh. Furthermore, solar power was projected to hit a low of 6¢/kWh in 2017.
However, there is more context worth noting here as well. “There is a big difference between prices bid and prices delivered. There are no utility-scale solar projects that have been delivered at $40/MWh,” a commenter on Greentech Media noted.
“Because there is a scarcity of opportunities for solar PPAs these days, developers are effectively betting that they will be able to deliver at the $40/MWh or less price five years from now. If they sign the PPA and can’t deliver, they’re out the project development security, which is roughly around $100/kW depending on the utility.”
That said, I don’t think many of us would bet against solar developers being able to deliver at $40/MWh (4¢/kWh) in a few years, and the downward solar price trend has been pretty strong. Austin Energy is certainly bullish it will continue, as seen in the Austin Energy chart below (shared last week at a presentation for Austin city council) and this quote from Khalil Shalabi: “If you continue the curve, you can see that if the cost points continue along this sort of exponentially declining curve. We expect to see prices out in the future that are possibly below $20 a megawatt-hour.”
If you don’t recall, Austin Energy is required to get 55% of its electricity from renewables by 2025, which is surely a key reason why so many solar project developers are eyeing the market and submitting the lowest bids they can.
Also note that this is not the first time a solar project bid for Austin Energy has broken the “cheapest solar power” bid record. For record-breaking news from about a year ago, see: Austin’s Super Cheap Solar Agreement (5¢/kWh) Goes To Recurrent Energy, Not SunEdison, which followed this earlier article: Solar Less Than 5¢/kWh In Austin, Texas! (Cheaper Than Natural Gas, Coal, & Nuclear).
For all those who were claiming last year that solar prices wouldn’t continue falling, there’s clearly a big difference between <4¢/kWh and 5¢/kWh, and the fact that 1,295 MW of solar projects were that low is quite astounding.