By - Michael Drost

Austin Energy bids reveal new frontier for solar growth

Energize Weekly, July 8, 2015

Austin Energy’s recent call for solar power contract solicitations, which saw offers for almost 1,300 megawatts of projects priced below 4 cents per kilowatt-hour, shows that solar power is entering a new frontier: one in which the value of solar is consistently and persistently beating that of competing energy sources, which will no doubt lead to a boom in demand, and with it a global solar boom.

Last week, Austin Energy released data on developer bids for solar projects that revealed record low prices, prompting the utility to advise Austin city officials to take a “measured” approach to buying solar in the next few years. Case in point: in March 2014, Austin Energy signed a 25-year deal with Recurrent Energy to purchase electricity from a 150-megawatt solar plant for just under 5 cents per kilowatt-hour. Now those prices are almost 20 percent lower.

“I think this is good news – we have a firm bid under $40 (per megawatt-hour),” said Austin Energy vice president of energy market operations Khalil Shalabi to the Austin Monitor, referring to the response the utility received to a recent request for proposal for up to 600 megawatts worth of solar contracts.

“The bad news is, 18 months after our last contract, we’re seeing prices 20 percent lower”, he said. “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.”

The experience of Austin Energy is further evidence that solar is entering a new phase. Instead of being an environmentally friendly competitor to baseload generation sources like coal or natural gas-fired power plants, still hamstrung by interconnection issues and carried along by generous tax credits, solar is now becoming a go-to energy source on its own terms. The dropping price for solar installations and its combination with storage technology (like Tesla’s Powerwall line of storage products) is making both residential and utility-scale solar development more and more attractive, while technology innovations are helping make solar panels more efficient and cost-effective.

Industry officials are already touting the RFP experience of Austin Energy and others as proof of solar power’s evolution. Last week, First Solar CEO Jim Hughes cited at a Edison Electric Institute meeting in New Orleans an RFP response for Texas utility CPS Energy and a project in the Middle East for Dubai Power & Water, both of which saw prices in the 5 cent range.

“I don’t remember the last time I saw pricing that had a 7- or 8-cent price in front of it…and [now] we’re regularly bidding in at…5- and 6-cent power. We’re beginning to see 4- to 5-cent power,” he said. He also predicted that the industry will be producing solar power for $1.00 per watt by 2017.

The prospect of $1 per watt solar has significant implications for future growth.  Cheaper and more efficient solar installations will open up markets in previously uncompetitive areas, like Africa, South America, and the Middle East, while also expanding access in developed countries to those who normally wouldn’t be able to afford it.  The administration of U.S. President Barack Obama, no doubt aware of solar power’s increasing affordability, recently announced an initiative to make it easier for low- and middle-income resident to access solar energy, while the community solar market is expected to grow at a compound rate of 59 percent between now and 2020.

 

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