Austin’s energy utility recently put out a call for 600 megawatts of new solar power, and the bids have come flooding in at record low prices.
“These bids are without question the cheapest bids ever seen in a utility solar solicitation,” said Cory Honeyman, a senior analyst with GTM Research, in an interview with Greentech Media.
The utility received offers for 7,976 megawatts of solar power in response to a call for bids it put out in April. Of that total, 1,295 megawatts were priced below four cents per kilowatt-hour.
This is great news for those concerned about the economic viability of solar power. And it’s great news for Austin Energy, which has to obtain 55 per cent of its electricity from renewable resources by 2025, according to a city resource plan.
But it also means the utility is feeling some “buyer’s remorse,” Austin Energy’s vice president of resource planning, Khalil Shalabi, told Greentech Media.
In March 2014, the utility signed a 25-year agreement with Recurrent Energy for solar power priced at just under five cents per kilowatt-hour. With the new proposals coming in, that deal has started to lose its appeal.
As a result, Shalabi is now considering moving forward on a 200-megawatt contract and waiting on the remaining 400 megawatts, in case prices continue to drop.
Banking on a continual decline in solar prices is risky. The 30 per cent investment tax credit (ITC), which is currently available to residential and commercial solar projects across the United States, is set to expire at the end of 2016.
Solar development is expected to slow for at least a year if the tax credit is not renewed. But Shalabi believes that won’t have a major impact.
“The ITC is not a driver for us making a decision today,” he told Greentech Media. “We don’t have to gobble up all 600 megawatts because of the ITC.”
In Canada, Ontario is the only province that has seen significant large-scale solar power development, due in large part to its feed-in tariff program. Under that program, large solar farms were once able to sell their electricity to the grid for 44 cents per kilowatt-hour.
However, the province cancelled the program for large-scale projects in 2013, and is developing a new procurement process for large renewable projects. Residential and small-scale commercial solar power producers can still sell their electricity for up to nearly 40 cents per kilowatt-hour.
Western Canada’s largest solar farm, the 1.3-megawatt Sun Mine development near Kimberley, B.C., is slated to come online this month. BC Hydro will pay out 11 cents per kilowatt-hour for electricity from that facility.