Texas city discovers that solar power is too cheap to ignore

PV Magazine

rsz_texas-solar-panel-installation-single-axis-trackerToday the Austin City Council meets to consider two sets of contracts, but the decision appears to be a done deal. More than 600 MW of bids came in at under five US cents per kWh.

Austin continues to make headlines because of its work to move rapidly to renewable energy at record low costs. After approving a landmark plan to transition the city’s municipal utility to renewable generation, Austin Energy received some of the cheapest bids for solar power ever recorded in its solar auction. This auction was over-subscribed with projects at under US$0.05 per kWh.

Today the Austin City Council, which has authority over municipal utility Austin Energy, will meet for approval of two sets of contracts from the auction. The first contains 200-300 MW of the lowest bids, down to around $0.04/kWh, from two companies for sites in West Texas.

The council will also consider approving a second set of up to 350 MW of contracts at a slightly higher price, but still below $0.05/kWh. Together, the two sets would make up around 600 MW of solar generation.

However, the decision over these contracts may have already been made. While Austin’s Sierra Club describes approval of the first 200-300 MW as uncontroversial, yesterday the City announced meetings of two regulatory committees to study the second set of contracts, which indicates that they will not be approved today.

This is the approach that the Lone Star Chapter Sierra Club has called for, which puts it at odds with other environmental and public interest groups, which want approval of the full 600 MW now.

The organization says that its position comes from its work with multiple stakeholders. “We think it is more important to build consensus among the City Council so that they are comfortable with it, as well as with large industrial customers while being sure to mitigate any potential rate impacts on people on the lower end of the income scale,” states Sierra Club Conservation Director Cyrus Reed.

Approval of the first set of contracts should allow these projects to be completed before the drop-down of the U.S. Investment Tax Credit (ITC) to 10% at the end of 2016. Despite this, Reed thinks that the city may be able to get a better deal by waiting to build the remaining 300-350 MW.

“There is a theory that even if the ITC goes down to 10%, within a few years the solar prices will be even better,” notes Reed.

Even with low wholesale electricity prices in Texas, the first set of contracts is set to have minimal impacts on rates, due to the very low bid prices. However, Reed notes that by waiting on the remaining contracts, there is a possibility that Austin may be able to finance and own some of the 600 MW itself, which could be done with lower-cost municipal funding.

Currently Austin has only one utility-scale solar project, the 30 MW Webberville plant, which was completed in 2012 at a cost three times higher than the current bids. With Webberville, 851 MW of wind projects and 112 MW of biomass, the city is getting 28% of its power from renewables, without even counting an estimated 40 MW of distributed solar.

The city has already contracted with Recurrent Energy to build another 150 MW PV project, which will go online in 2016. When this and the 200-300 MW of solar projects in the first set of contracts are completed, Sierra Club’s Reed estimates that the city will get around 40% of its electricity from renewable energy.

“At the end of the day, there is going to be a huge purchase by Austin Energy of solar,” notes Reed.

He also notes that this is not unique in the state, where the largest utility carbon emitter, Luminant Energy, earlier this month announced a contract to procure electricity from a 116 MW solar project owned by SunEdison. This is a far cry from the lack of interest that investor-owned utilities in Texas showed in solar as recently as last year.

“It’s kind of new world,” says Reed.

Source: PV Magazine. Reproduced with permission.

Comments

10 responses to “Texas city discovers that solar power is too cheap to ignore”

  1. Bob_Wallace Avatar
    Bob_Wallace

    Giles, do you know if the 4c/kWh bids are fixed price or might the price adjust up over time?

    The Buffett 3.85/kWh PPA has an adjustment factor that makes it a bit more than 5c average over 20 years. (It might be a better deal than a fixed 5c because the latter years payments would be made with deflated pennies.)

    1. Bernard Finucane Avatar
      Bernard Finucane

      I’m pretty sure they’ll raise the price if the price of sunlight goes up.

      1. Bob_Wallace Avatar
        Bob_Wallace

        I’m sure the contracts would have been written tightly enough to prevent that from happening.

  2. Le Clair Avatar
    Le Clair

    Lets spot the difference between Austin and most of the USA and Canada and most of Australia.
    I pay 26c/kWh plus $41 per month for a “supply charge”
    I get 6.3c/kWh for my solar generation lost to the grid.

    Take a look at this…
    If I lived in Austin and consumed 16kWh per day and had solar, I would pay 6.575c/kWh in autumn, winter and spring and 8.075c/kWh in summer plus $10 per month for the “supply charge”.
    My annual electricity bill in Australia is $2,010. For the same electricity in Austin, I would pay $533.17 which includes the cost of street lighting (which we pay separately in our rates in Australia) and a “community benefit program”.
    For my solar export from my 6kW system, I get $311.12 back for exporting 5,256kWh.
    If I had the same system in Austin, I would receive $594 per year at 11.3c/kWh which is called a “value of solar” rate.

    Its no wonder Australian business doesn’t stand a snowflakes chance in hell competing against those rates. What’s the solution?

    1. Jacob Avatar
      Jacob

      What do you mean by Aussie firms. Do you mean factories, offices, and retailers or do you mean Aussie power firms.

      1. Le Clair Avatar
        Le Clair

        Hi Jacob
        I mean factories and businesses including retailers. How do we even pretend to be able to compete when we pay 3 times to 5 times as much for the most basic business input being energy. It’s not that our electricity generation s uncompetitive, in fact our generation is one if the lowest cost in the world at about 3.5c/kWh. Our renewable energy programs, according to my itemized electricity accounts, cost about 1c/kWh. It seems, as usual, that layers upon layers of bureaucracy then add 20c/kWh or more to make ours some of the most expensive electricity in the world.
        Thanks for relying.

        1. Jacob Avatar
          Jacob

          It is not bureaucracy, but the privatization of electricity. And also the belief in AUS that land should be unaffordable while in Germany most voters rent.

          1. Le Clair Avatar
            Le Clair

            Sorry, I don’t understand what you mean by “the belief in Aus that land should be unaffordable while in Germany most voters rent”. How is this relevant to the cost of electricity?

          2. Jacob Avatar
            Jacob

            You were saying that firms in AUS cannot compete against firms abroad.

            Electricity is not the only insane cost in AUS, land is also overpriced in AUS.

          3. Le Clair Avatar
            Le Clair

            Hi Jacob

            I thought that was what you meant just wanted to be sure. Could not agree more with what you said. The entire Australian economy is uncompetitive. From energy to telecommunications, industrial relations to property prices, we are living in the 1980’s with 2030 cost of living. Something has got to snap if Australia is going to have a future. Sadly that snap needs to be a major recession to reset the economic balance – one on the scale of the 1990 “recession we needed to have”.

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