Reports of record-low prices for utility-scale solar power are pouring in from around the world. In Chile, prices dropped below 3 cents per kilowatt-hour last year. But such super low prices have not been part of the energy environment in the US — until now.
On May 22, Tucson Electric Power announced it had signed a 20-year power purchase agreement with NextEra Energy Resources to buy solar power from a new 100-megawatt solar power plant that will be built and operated by NextEra. The completed system will supply enough electricity to run 21,000 homes in the Tucson area. The price? Less than 3 cents per kilowatt-hour.
To put this in a little context before proceeding, the unsubsidized cost of electricity from fossil fuels has a low end of about 4.8 cents per kilowatt-hour in the US. 3 cents per kilowatt-hour crushes that and the only potential source of competition in that range is wind power, but that’s assuming the location has great wind resources. Overall, the point is clear: fossils can’t compete with solar and wind in more and more cases.
The average cost of residential electricity in the US is 13 cents per kilowatt-hour and the average cost for commercial customers is 10.5 cents per kilowatt-hour. At 3 cents per kilowatt-hour wholesale, or even 4–5 cents per kilowatt-hour if you add in some storage costs, and even adding in other utility costs, there is plenty of room there to reduce retail electricity costs and/or give utilities more profit. Which will utilities choose?…
Furthermore, solar costs are expected to continue dropping for decades even without any technological breakthroughs.
TEP says it is paying an “historically low price” under the agreement with NextEra, one that is “less than half as much as it agreed to pay under similar contracts in recent years.”
The new solar farm will include a “long duration battery storage system,” says NextEra, but the cost of the grid-scale energy storage system is not included in the base price. It should also be noted that the numbers from other countries like Chile and India are not reliant on government subsidies, but the TEP contract is the net price after taking federal solar incentives into consideration.
PV Magazine reports “this is the lowest price” yet for solar in America.
Bloomberg New Energy Finance advisory board chairman Michael Liebreich commented recently that dramatic declines in the cost of solar power and the fact that they now mean “unsubsidized wind and solar can provide the lowest cost new electrical power in an increasing number of countries, even in the developing world — sometimes by a factor of two.”
Editor’s note: This article has been updated for accuracy and to add more context to the hot news.
Source: Think Progress | Photo credit: Tucson Electric Power