In May 2015, Austin Energy received a firm bid for solar energy for less than 4 cents per kWh. Responding to an RFP seeking up to 600 MW of solar capacity, the bid is one of the lowest solar bids ever seen in a utility solicitation.

Key Details

• The majority of the RFP bids received by Austin Energy were located in West Texas, a region with a strong solar resource
• The low bid is approximately 20% less than the solar contract Austin Energy signed in March 2014 for 150 MW; this contract priced solar energy just under 5 cents per kWh
• Austin Energy expects utility-scale solar costs to continue to decline in the coming years, even after the federal investment tax credit (ITC) drops from 30% to 10% in 2017
• Solar energy aligns with Austin Energy’s current resource plan which includes 600 MW of new solar and a goal of 55% of renewable energy by 2025
• Austin Energy outlined a “measured approach” where current bids meet a portion of the 600 MW and remaining capacity comes from future solicitations presumably at lower prices
• In July 2014, NV Energy reported what is being labeled the “lowest” solar bid – a power purchase agreement from a 100 MW facility at 3.87 cents per kWh with 3% escalation per year

Implications

Large utility-scale solar projects, with their scale economies, in areas with good solar irradiance continue to improve their cost competitiveness with other supply options. Upcoming changes to the ITC (i.e., 30% to 10% in 2017) will cause a temporary hiccup but will unlikely disrupt the long-term trend toward increasing cost competitiveness for the utility-scale solar industry. Instead, the event will mark an important transition as the industry moves from policy to market drivers. First Solar CEO, Jim Hughes, highlighted this point by recently calling the ITC “irrelevant,” and forecasting it will take 18 months for technology price declines to offset price increases associated with changes to the ITC.

More Information

Austin Monitor: Solar Prices Keep Dropping, Says Austin Energy

GreenTech Media: Cheapest Solar Ever

Austin Energy Presentation: Resource Plan Update: Solar RFP & Independent Review

Utility Dive: NV Energy Buys Utility-Scale Solar at Record Low Price Under 4 Cents/kWh

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