US utility chooses wind and solar - 'cheaper and more reliable' | RenewEconomy

US utility chooses wind and solar – ‘cheaper and more reliable’

One of the biggest utilities in the US asks for more wind and solar because it is cheaper and more reliable than fossil fuel alternatives. ‘We are not taking on solar because we have to, but because it is cost-effective and economical,’ the company says. Welcome to a new energy world.


Well, there goes the myth that cheap shale gas would price renewables out of the US electricity market. Xcel Energy, one of the country’s biggest utilities, has just announced a planned major expansion of its solar and wind investments – because they are “cheaper and more reliable” than natural gas.

In a filing to the public utilities commission in the state of Colorado, Xcel Energy requested permission to include 170MW of new, utility-scale solar capacity and 450MW of wind energy capacity in the state.

The reason, Xcel Energy said, was not to meet renewable energy targets (which in Colorado happen to be 30 per cent by 2020), but because these technologies were best placed to fill basic generation needs. Solar and wind, it said, were competitive with the cost of gas-fired generation.

“Based on generation needs, the most reliable and most cost-effective resources happen to be solar and wind,” Xcel Energy spokeswoman Michelle Aguayo told the online publication SRN. “We are not taking on solar because we have to, but because it is cost-effective and economical.”

A lot has been written about the shale gas boom in the US and its apparent impact on other technologies, particularly renewables such as wind and solar. But its principal victims in the short term appear to be coal-fired generation and nuclear, with neither able to compete on cost – particularly with the additional burden of emissions and/or safety regulations.

Part of Xcel Energy’s plan out to 2018 include the closure of a 108MW coal facility and the switching of another to natural gas.

Wind is now priced at less than $50/MWh in the US, and the proposed build out of wind will take Xcel’s total wind capacity to 2,650MW – nearly equivalent to Australia’s entire capacity.

In an earlier filing, Xcel Energy had wanted to install 550MW of wind capacity, but the PUC only allowed 200MW because it was not sure it would be cost-effective. Excel insisted it would be, and is now pushing for the allowance to be lifted to 450MW.

The cost of utility-scale solar is also falling fast. A recent auction in Palo Alto saw the local utility contract 80MW of utility-scale solar at a price of just under $70/MWh, and public utilities have recently contracted large-scale projects at around $90/MWh. The prevailing market price in that market is about $100/MWh.

Xcel Energy already has 80MW of utility-scale solar and 160MW of rooftop solar from residential customers. It is now seeing utility-scale solar coming down – and from Xcel’s point of view – building large-scale solar, with single-axis tracking, would be a much cheaper option than rooftop solar.

“For the first time ever, we are adding cost competitive utility-scale solar to the system,” said David Eves, the head of an Xcel subsidiary that deals with regulatory matters. “The 170 MW we recommend would triple Xcel Energy’s current utility-scale solar in Colorado and it equates to all of the customer-sited solar in the state of Colorado, at about one half of the cost.” It recommends around 42.5MW of additional rooftop solar.

As John Farrell, from the Institute of Energy Self Reliance, writes in a blog on the same subject, even rooftop solar is meeting peak demand in the state of Colorado, at less than half the cost of peaking gas plant.

“Solar not only meets this peak need at a lower per kilowatt-hour cost, but also without the harmful emissions from running a power plant on standby (or fracking its fuel out of the ground),” he writes.

“What’s important to keep in mind when talking about solar and electricity prices is that solar energy production tends to align very well with the highest energy demand on a utility’s system.

“It doesn’t have to be cheaper than a nuclear power plant built in 1965, it just has to be cheaper than the next kilowatt-hour the utility needs at 4pm on a hot, July afternoon. For many utilities (like Xcel, one of the 10 biggest in the US), it is.  For many others, it will be soon, without subsidies.

“And don’t forget, utilities buy power plants for 30, 40, or 50 years. With costs dropping by 10% per year, if solar power’s not cheaper now, it will be long before a new fossil fuel power plant is paid off.”

Farrell also makes another point about the move by Xcel to embrace utility-scale solar: they are in fact competing with their own customers, because as more consumers add rooftop solar, that means lower revenues for the utilities. This is especially relevant in Colorado, where the community in Boulder (currently being hit by “biblical floods) has been trying to “break away” and establish its own municipal utility, on the basis that it can provide cheaper and greener electricity than a centralized utility.

“Xcel’s Colorado plans suggest the utility is wising up, and that the era of customer-owned solar only lasts as long as people are willing to raise holy hell or legislatures are willing to tell them to do the right thing,” O’Farrell writes.

“So the utility shift to solar is both bad and good. The bad news is that locally owned solar pours piles of cash into local economies, and utility-owned solar is going to suck it right back out again. The good is that even an anachronistic, monopoly utility can figure out the financial advantages to clean energy, and we need a lot of it to save the climate.”

“Game on.”

(Editor’s note: John Farrell writes another thought-provoking analysis on the death of utilities. See it here).


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  1. Karl-Friedrich Lenz 7 years ago

    “Xcel”lent news, though sometimes spelled inconsistently as “Excel”lent in the article above.

    • Giles 7 years ago

      Quite so. It’s been a battle with spell-check mechanism which automatically switches it back. I think i finally won. I think.

  2. Rami Niemi 7 years ago

    What is your source for “Wind is now priced at less than $50/MWh in the US”?

    • Giles 7 years ago

      In announcing a recent report released by the US Department of Energy (DOE) and prepared by Lawrence Berkeley National Laboratory (Berkeley Lab), Berkeley Lab actually noted that, “The prices offered by wind projects to utility purchasers averaged $40/MWh for projects negotiating contracts 2011 and 2012, spurring demand for wind energy.” Read more at

      • Bob_Wallace 7 years ago

        That’s $40/MWh “delivered to the door”. 4c/kWh.

        That number includes a 2.2c PTC which makes the unsubsidized price 6.2c. It also includes costs not used to calculate LCOEs (levelized cost of energy). Included in the 4c/6.2c number are land costs, transmission costs, taxes, and owner profits. A reasonable guess is that the average LCOE is around 4c/kWh, perhaps slightly higher.

        There are reports that some wind farms are writing PPAs for 2.5c/kWh. That suggests they are producing electricity for 2c to 3c/kWh.

        • Rami Niemi 7 years ago

          Does the producer always and automatically get the 2.2c PTC, or is there some book keeping finesse in it?

          So the actual LCOE (anticipated by the producer) for 4c/kWh agreement is ((4c/kWh (PPA) + 2.2c PTC)*(1-margin of the producer) ~ 6.2c*0.8=4.96c.

          Does this make sense?

          • Bob_Wallace 7 years ago

            With wind there’s actually a choice between a 2.2c PTC (which increases over time and is limited to 10 (?) years or a 30% ITC.

            I just use the PTC when talking ‘back of the envelope’. I figure that the two options have about the same value.

            If the wind farm owner chooses the PTC they would get the selling price, the PPA price, from the buyer and then when paying taxes would be allowed to deduct the 2.2c x number kWh sold.

            I’m going to guess that with the current low price of wind that most owners would opt for the 30% ITC since there can’t be 2.2c of taxable income in a 4c sale. If you’re making a 1c profit and paying a percentage of that penny out in taxes most of the 2.2c tax credit wouldn’t be useful.

            I believe that he ITC can be sold to businesses that can actually use it. At least that has been the case in the past. I know that I looked at investing in wind farms some years back and one of the benefits was that I would get a portion of the ITC that I could use to offset income from other sources.

            I don’t have the ability to tell how close your math is. All we really know is the average selling price and that there are subsidies involved which help bring those prices down.

            I suppose we also know that wind have become very affordable. Solar should join it soon. We’re looking at a rosy future.

          • Rami Niemi 7 years ago

            Thank you. The ITC and your example really clarifies this. However, wikipedia says about ITC: “small wind (< 100 kW) are eligible for credit of 30% of the cost of development".

          • Bob_Wallace 7 years ago

            The regulations give the option of a 30% ITC to all size wind developments. I read that as making the 30% tax credit available to individuals installing small wind turbines just as individuals qualify for a 30% tax credit for solar systems.

            The PTC is indexed to inflation and has increased to 2.3 cents per kWh.

            Here’s a concise, easy to understand description of the program.


            (Boy, is it hard to find factual stuff. Fossil fuel folks have packed the web with their dross.)

      • Rami Niemi 7 years ago

        Thanks. Haven’t noticed this one.

    • Ronald Brakels 7 years ago

      And, Rami, you may be interested to know that with a 5% discount rate Australia’s recently opened McArthur windfarm produces electricity at about 6 cents a kilowatt-hour. (I guess that would be about 5.6 US cents at current exchange rates.)

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