Austin Energy Sees Solar Prices Below Wholesale Electric Rates

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New data from Austin Energy shows that the company’s recent request for proposals (RFPs) for 600 megawatts of solar power has revealed the lowest price for solar power yet—under $40 per megawatt hour or 4 cents per kilowatt hour. That’s lower than the average wholesale cost of electricity throughout the U.S., which ranged from roughly $25 per megawatt hour to more than $60 per megawatt hour on June 30, for example.

The utility released data on the nearly 8 gigawatts of bids it received for the RFP. Of those nearly 1.3 gigawatts of bids priced at below 4 cents per kilowatt hour. “The technology is getting better and the prices are decreasing with time,” said Khalil Shalabi, Austin Energy’s vice president of resource planning, as reported by the Austin Monitor. Shelby made the comments during a presentation in front of the Austin city council last week.

“These bids are without question the cheapest bids ever seen in a utility solar solicitation,” said Cory Honeyman, a senior analyst with GTM Research. Honeyman discussed the RFP in a piece on GTM Research’s solar news channel.

“I think this is good news – we have a firm bid under $40 (per megawatt hour),” Shalabi said. “The bad news is, 18 months after our last contract, we’re seeing prices 20 percent lower. So there’s a little bit of buyer’s regret going on here with the Recurrent (Energy) deal that we did. That’s part of the risk of being a bit of an early mover in technology.”

That deal with Recurrent was for 150 megawatts of projects, which were still at a pretty good rate—5 cents per kilowatt hour. It shows how quickly costs are falling. The prices are below the 6 cents per kilowatt hour rate that DOE projected for 2020 and lower than previous contracts Austin Energy signed for solar power.

Because of the recent falls in pricing Shalabi recommended the Austin Energy go ahead with just 200 megawatts of the projects, leaving 400 megawatts of solar power to be procured as prices continue to fall. The RFP is part of the city’s plan to add in 800 MWs of solar power, including 200 MWs of rooftop solar by 2020.

“If the costs continue on this exponentially declining curve we expect to see prices in the future possibly below $20 a megawatt hour,” Shalabi is recorded as saying. “The technology is getting better and the prices are decreasing with time.” He anticipated that the solar energy prices may stagnate or even go up when the Investment Tax Credit (ITC) expires at the end of 2016 but that prices would continue to fall about 18 months after the ITC ends. At such a time solar should reach those lower cost levels.