Analysts Confirm New Record-Low Solar PPA in Texas

Analysts Confirm New Record-Low Solar PPA in Texas

New Braunfels Utilities, a municipally owned utility in Texas, signed a new record-low power-purchase agreement in Q4 of this year at under $25 per megawatt-hour.

The 15-year contract with Engie-affiliated Long Draw Solar is the lowest confirmed in the U.S. The project capacity is 255 megawatts.

Austin Energy claimed the previous record PPA, announced at the end of last year. But the price of that deal was unconfirmed, hovering between $21 and $27.25 per megawatt-hour, according to Colin Smith, a senior solar analyst at Wood Mackenzie Power & Renewables.

The Long Draw project will be located in West Texas and is projected to come online in 2020.

Its announcement echoes many of the conditions surrounding Austin Energy’s record low price range.

Texas is still among the top 10 solar states by megawatts operating and in development, as it was last year. And much like the political environment that surrounded the Austin Energy deal, the Section 201 tariffs are still depressing solar growth. According to WoodMac’s latest Solar Market Insight report, released this week in partnership with the Solar Energy Industries Association, Q3 2018 was the first time since 2015 that utility-scale installations sunk under 1 gigawatt.

Austin Energy’s PPA came just ahead of the Trump administration’s announcement of tariffs in January, when uncertainty was high. At the time, Smith said the shockingly low price was a “bold statement” that the solar industry could ride through the challenges.

Now that the tariff situation has clarified, Smith said solar can continue on a growth trajectory. He called the low quarter “a symptom of this [tariff] hiccup in the marketplace.” But announcements like the one from New Braunfels Utilities indicates the industry is still getting more competitive. In addition to Texas, utilities in states such as New Mexico, Colorado, Arizona and Nevada have seen power-purchase agreement prices below $30 per megawatt-hour.

“This announcement shows that the cost of utility PV is still dropping,” said Smith. “Despite tariffs, we have seen solar become even more competitive with natural gas and other electric generating resources.”

New Braunfels is investing in the project to keep prices low for customers. According to the utility’s CEO, Ian Taylor, solar “will allow NBU to maintain one of the lowest retail electric rates in the country.”

Though WoodMac and SEIA’s latest report showed a downturn in utility-scale solar in Q3, analysts forecasted that installations will pick up in Q4 2018. They also reported a healthy procurement pipeline looking ahead. Smith points to over 11 gigawatts of new projects announced through Q3 2018.

Texas will continue to be a growth market. Because of high levels of deployment, wind doesn’t add as much value as it once did there, according to Smith. As solar costs continue to fall, he said the resource's midday peak will make solar a valuable asset in the state in the 2020s.

New Braunfels' request for proposal, released in April, was a partnership with other Texas municipal-owned utilities including Bryan Texas Utilities, Denton Municipal Electric, Kerrville Public Utility Board and Garland Power & Light.

With the addition of the new solar project, renewable energy will make up 40 percent of the utility's portfolio.

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