Buffett strikes cheapest electricity price in US with Nevada solar farm

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Warren Buffett agrees on purchase price for solar power from First Solar plant that might be cheapest electricity available anywhere in US.

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Having previously pledged more than $30bn in renewable investment, Buffett has since struck what might be the cheapest electricity price in the U.S. - and from a solar source. Wikimedia/Pete Souza. Read more: http://www.pv-magazine.com/news/details/beitrag/buffett-strikes-cheapest-electricity-price-in-us-with-nevada-solar-farm_100020120/#ixzz3fM3RnA77
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PV Magazine

Berkshire Hathaway’s NV Energy strikes power purchase agreement price of 3.87 cents per kWh for electricity generated by First Solar’s 100 MW Playa Solar 2 project, according to Bloomberg.

Having previously pledged more than $30bn in renewable investment, Buffett has since struck what might be the cheapest electricity price in the U.S. - and from a solar source. Wikimedia/Pete Souza. Read more: http://www.pv-magazine.com/news/details/beitrag/buffett-strikes-cheapest-electricity-price-in-us-with-nevada-solar-farm_100020120/#ixzz3fM3RnA77
Having previously pledged more than $30bn in renewable investment, Buffett has since struck what might be the cheapest electricity price in the U.S. – and from a solar source.
Wikimedia/Pete Souza.

A Nevada utility owned by U.S. tycoon Warren Buffett has agreed upon a purchase price for solar power from a First Solar plant that might well be the cheapest electricity available anywhere in the US, reports Bloomberg.

NV Energy, a Nevada-based utility owned by Buffett’s Berkshire Hathaway, has agreed to pay just $0.0387/kWh for solar electricity from the 100 MW Playa Solar 2 project being developed by U.S. thin film company First Solar.

The PPA undercuts a previous price agreed with NV Energy last year – $0.046/kWh from SunEdison’s 100 MW Boulder Solar Project – and could quite possibly be the cheapest electricity in the U.S.

“That’s probably the cheapest PPA I’ve ever seen in the U.S.,” Bloomberg Intelligence utility analyst Kit Konolige said. “It helps a lot that they’re in the Southwest where there’s good sun.”

Having paid $0.1377/kWh for renewable energy in 2014, this new, lower price is an encouraging reflection of the rapid decline in solar costs over the past 12 months. Nevada’s Public Utilities Commission, which oversaw the submission of the 20-year, fixed-rate PPA, called the price point “very reasonable” when compared to both existing solar contracts and other fossil-driven generation sources.

Bloomberg New Energy Finance (BNEF) analyst Jenny Chase remarked to Bloomberg that NV Energy’s power price is “one of the lowest, definitely,” adding: “That’s quite aggressive bidding by First Solar”.

First Solar’s Steven Krum said that the contracts demonstrate how utility-scale solar power plants in the U.S. are becoming cheaper to build and operate, while SunPower CEO Tom Werner wrote in an emailed statement to Bloomberg: “Power generated from solar plants is cost-competitive with power from traditional fossil fuel burning plants, and becoming more cost-competitive every day.”

The agreed purchase price bests the $0.0585/kWh agreed by Dubai’s state-backed DEWA utility in January, and lower further the barriers for greater renewable integration.
Source: PV Magazine. Reproduced with permission.

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10 Comments
  1. Henry WA 3 years ago

    For international comparison does this price include a subsidy?

    • juxx0r 3 years ago

      It definitely includes a bonus decimal point.

  2. Bob_Wallace 3 years ago

    Cheapest solar. Apparently wind PPAs have been signed for about 1.5 cents.

    And, yes, both this solar and the wind projects receive subsidies. It’s not clear whether the projects picked the Investment Tax Credit or the Production Tax Credit.

    If they took the PTC they would receive a tax credit of 2.3 cents per kWh produced for the first ten years of operation. Since PPAs generally run 20 to 25 years and the ITC expires after 10 years the average per kWh subsidy is between 0.9 and 1.15 cents per kWh. 3.87c + 1.15c = 5,02c/kWh. Not quite solar for a nickle, all in, but danged close.

    • Bob_Wallace 3 years ago

      Just a note for those who may not be familiar with PPAs, Power Purchase Agreements. They are simply contracts selling a certain amount of power at an agreed price over an extended period of time. The PPA price is an “all in” price – it covers the cost of producing the electricity and all other company expenses including profits. PPA prices cover more than just the LCOE.

      PPAs have been great for wind and solar farm builders. They’ve allowed investors to establish a market and a set price for an extended time so that much of the risk is removed. Utilities get to lock in a fixed price over an extended period which lowers their risk created by volatile fuel prices.

    • Jens Stubbe 3 years ago

      Hi Bob_Wallace

      Last year the average 20 year wind PPA for 2013 was available around May but this year I have not seen the numbers as of yet. Do you know the explanation or have you possibly found the numbers. This article expected the numbers by April http://cleantechnica.com/2015/04/13/solar-wind-power-prices-often-lower-fossil-fuel-power-prices/

      • Bob_Wallace 3 years ago

        I just looked on line and there’s nothing about the 2014 report.

        I don’t think the DOE Wind Technologies Market Report comes out until the first of August. That appears to be when the 2012 and 2013 reports were released. I think Zach is talking about a different report in the linked article.

        Scuttlebutt is that we may see a PPA signed for 1.5 cents/kWh in this next report. I don’t know if it was reported to the DOE or not. Hopefully is was and will be part of the paper.

        • Jens Stubbe 3 years ago

          Hi Bob_Wallace

          Sorry to trouble you but this document points to a built in 3% annual price increase and then the PPA suddenly does not look so fine and the business case for First Solar and Buffett a lot better than it appears in the press. http://pucweb1.state.nv.us/PDF/AxImages/DOCKETS_2015_THRU_PRESENT/2015-7/3615.pdf

          • Bob_Wallace 3 years ago

            Right. A built in inflation factor makes the 3.85 price better than a non-inflating price.

            Your link talks about a fixed SunPower PPA at $46/MWh and an adjusting upward First Solar $38.7/MWh.

            I just ran a quick spreadsheet and look at the $38.7 with a 3% inflation factor. Over 20 years the price would average out at $52 (vs. $46). The difference may not be as great when one factors in the value of getting more money sooner in the case of the SunPower contract.

            (I’m never troubled by more facts. I may not always like them, but I prefer to operate with correct information.)

  3. Jens Stubbe 3 years ago

    Bob Wallace beat me to the punch but generally the average PPA for wind in US is below $0.025/kWh so the Bloomberg article probably only deals with solar PPA’s.

    The ITC is to expire 2017 and the PTC is only extended annually so it can be discontinued anytime.

    If wind drop approximately 80% the fossil age will be over because at that price point renewable electricity will be a cheaper source of energy than crude oil, coal or fracking gas for production of Synfuels.

    Contrary to the popular notion wind and solar are scalable to meet the global energy need. Wind will occupy an area only slightly larger than half of Australia’s territory and solar a much smaller area. The actual foot print of wind will however be much smaller and leave plenty of land for nature and farming beneath and between the rotors.

    The natural resources needed for a fully renewable system are not constrained.

    By 2014 240.000 commercial scale wind turbines were in operation. If you ten double that number and scale to the presently largest wind turbines you can cover the total global energy demand.

    Currently the drop in wind PPA is approximately 15.6% annually and a load of interesting new technologies are becoming mainstream along with the continued scaling process and incremental quality improvement.

    In recent years the solar PPA has been dropping faster with a chance of catching up with wind. Further a solar plant will probably be fully operational many years after the expiration of the PPA contract period.

  4. Smurf1976 3 years ago

    In a broader context, Buffett knows what he’s doing when it comes to money and he sees that renewables are worth the effort. Enough said.

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