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Green Building News

Cost of Solar Electricity Hits a New Low

Under a proposed contract in California, a municipal utility will buy PV electricity for less than 4 cents per kilowatt hour

A utility-scale photovoltaic project in California will produce electricity for Palo Alto at a contract price of 3.7 cents per kilowatt hour, making it the cheapest purchase deal for PV power in the U.S.
Image Credit: Portland General Electric / CC / Flickr

The Palo Alto, California, city council is considering a power purchase agreement (PPA) with a developer that would let the city’s municipal electric utility buy power for about 3.7 cents per kilowatt hour — the lowest known price in the U.S.

PV magazine reports that the contract would be between the city and Hecate Energy, which will supply electricity from the 26-megawatt Wilsona Solar project in Los Angeles County. The Palmdale, California, project is scheduled to begin operation in 2021 and provide 75,000 MW of electricity.

The proposed deal has a 25-year base term, with optional extensions that would keep it in force for a total of 40 years. The full city council is scheduled to vote on the contract on March 21.

“I have not seen a PPA for 40 years before, or a PPA for under 4 cents,” Mercom Capital CEO Raj Prabhu told the magazine. “It might make sense for both parties: Very low clean power PPA for the city and a very long-term contract for the vendor which justifies the record low price.”

The website UtilityDive says that falling prices for installed solar were one reason that the industry added 7.3 gigawatts of capacity last year, which includes both utility-scale and smaller distributed energy projects. That’s more than the added capacity of new natural gas power plants.

James Stack, the contract administrator for Palo Alto’s Utilities Department, says that the price is almost 50% lower than the city’s other solar contracts worked out just a few years ago. At the time, he said, those contracts were thought to be “pretty well priced.”

It’s also coming at a good time. The severe statewide drought has reduced hydroelectric sources of electricity, which usually account for about half the city’s total. Replacing that with non-hydro power is forcing the city to raise its electricity rates by about 12% in July and another 8% next year.

The Hecate solar project will provide about 7.5% of the city’s electricity consumption.

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