Tuesday, September 11, 2012

Latest CA Solar RFP Winners Average 8.37 Cents/kwh For Next 20 Years

I am a solar bull for one principal reason--sharply falling solar prices.  Here is a prominent, recent example.

California's Pacific Gas & Electric (PGE) latest RFP for up to 50 megawatts of solar power produced an average fixed price of 8.37 cents per kwh for 20 years.  PGE awarded contracts to 6 bidders. www.pge.com/nots/rates/tariffs/tm2/pdf/ELEC_4106-E.pdf at page 19 for the average price.  The winning projects include two 20-megawatt and four 2-megawatt facilities.  The 2 megawatt facilities are relatively small, a size that is increasingly found behind the meter and on roofs, but not able to capture the very lowest cost per watt pricing in the solar market.

A 20-year contract for a fixed 8.37 cents per kilowatt-hour is enticing. The power will be produced in peak hours, when market prices are highest, and the facilities will provide capacity to meet hourly, daily, and annual peak demands.  As such, the power they produce is especially valuable.

And to state the obvious, the contract is for 20 years at a known price.  Unlike fossil fuel plants that must manage substantial fuel price volatility, these solar plants have zero cost fuel and very low other operating costs that allow them to confidently offer decades-long contracts at a fixed price.

It is also important to underline that the 8.37 cents is an average price of the 6 winning bids and the cost of building just about anything in California is higher than in most parts of the country.  That means two things.  The lowest bids accepted bids came in even lower than the 8.37 cents price, and prices for similar projects in some other parts of the country would likely be lower.

Finally, though this 2012, California 8.37 cents average price is impressive, even lower solar prices are ahead, because solar pricing continues to fall significantly!

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