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.
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:
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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