Solar power crosses threshold, gets cheaper than natural gas

Source: David Ferris, E&E reporter • Posted: Tuesday, August 25, 2015

Several large solar power plants under construction in the United States have in the past few months promised to do something that none has done before: offer prices equal to or lesser than that of a natural gas-fired power plant, even as gas is abundant and cheap.

The latest to flirt with that threshold is a 156-megawatt Comanche Solar project in Pueblo, Colo., that broke ground yesterday and will be the largest solar-power generating station east of the Rockies. It is being built by solar developer SunEdison Inc. on behalf of Xcel Energy Inc., one of Colorado’s largest electric utilities, through a power-purchase agreement that lasts 25 years.

That photovoltaic power station follows the example of other projects across the sunny West. Last month, NV Energy Inc., the principal utility for the state of Nevada, owned by billionaire investor Warren Buffett, signed a deal with solar developer SunPower Corp. for a 100 MW plant at a price of 4.6 cents per kilowatt-hour. Also last month, NV Energy fixed a price with First Solar Inc. for $3.87 per kWh from a 100 MW plant that could be the cheapest electricity in the United States according to PV Magazine.

Also, in May, Austin Energy in Texas signed a 20-year, 150-MW deal with Recurrent Energy for 5 cents per kWh, Utility Dive reported.

As recently as 2014, solar power plants were costing nearly 14 cents per kWh, according to PV Magazine. By comparison, the benchmark 2014 price of electricity from an advanced combined-cycle natural gas plant was 6.4 cents per kWh, according to data from the Energy Information Administration.

“I look at these unbelievable [power purchase agreements], and it’s remarkable that we’ve come so far so quickly,” said Jesse Morris, a manager at the Rocky Mountain Institute, which focuses on reducing the price of solar power.

Whether this boomlet of ultra-cheap large solar plants will continue is unknown. Developers and utilities are racing to get the solar plants connected before the most generous provisions of the federal solar investment tax credit expire at the end of 2016.

The economics of solar versus fossil fuels varies from place to place, and it is uncertain whether steady drops in the price of solar systems will be able to compensate for the end of federal tax subsidies.

In the case of the Comanche plant in Colorado, the price has not been made public. David Eves, the head of Xcel Energy’s Colorado division, said the solar plant beat the price of the alternatives, according to the company’s projections.

Mark Barineau, an analyst for Lux Research, pegged Comanche’s price at between 5 and 6 cents per kWh, based on an Xcel document.

Eves of Xcel said, “Over the 25-year life of the project, it’s more economic than the alternative, which would have been adding gas-generating capacity and supplying this energy from a mix of resources.”

But the particular situation of the Comanche plant “doesn’t mean that all solar beats all gas,” he added.