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Georgia Is the Latest State to Procure Dirt-Cheap Solar Power

Georgia and Solar Energy

In Obama’s America, according to conservatives, utilities are forced to consume expensive green energy mandated by the government.

In an ideal conservative America, however, utilities would procure the cheapest and most reliable resource to deliver value to consumers.

Those worlds have officially collided. 

One year ago, Tea Party members in Georgia joined forces with environmental advocates to force the state’s utility, Georgia Power, to competitively procure more solar power. Upset about a lack of consumer choice and the $1.5 billion in cost overruns from the Vogtle nuclear power plant, the groups convinced regulators to expand Georgia Power’s solar target by an additional 525 megawatts.

The results of competitive bidding through the utility-scale portion of that program are now coming in. And they once again show that solar — maligned by many national Republicans, but often embraced locally by conservatives — is a very cost-competitive technology.

After a second round of bidding from developers seeking to build hundreds of megawatts’ worth of solar plants in the state, Georgia Power reported that the average price of electricity came in at 6.5 cents per kilowatt-hour. That’s 2 cents cheaper than last year’s bids.

In a filing with the Georgia Public Service Commission this week asking for approval of the projects, the utility lauded the prices as proof that solar can “provide competitive pricing when challenged to do so.”

The projects, which were procured through two programs set up by Georgia Power, range from 101 megawatts to 30 megawatts in capacity. In total, Georgia Power is seeking approval for ten new solar power plants worth a total of 515 megawatts of capacity, planned for build-out in 2015 and 2016.

Georgia Power reported 5,100 megawatts’ worth of bids from 56 different companies. 

“While the primary evaluation criterion was economic benefits to customers, as required by the RFP, the evaluation also included non-price factors such as projects with a meaningful economic impact on the Georgia economy, the inclusion of RECs from the facility, financial strength and experience of the developer and interconnection due diligence,” wrote the utility in its filing.

The power-purchase agreements (PPAs) for each winning project were not revealed — only the average of 6.5 cents per kilowatt-hour.

These competitive prices for large-scale solar projects are not unique to Georgia. In Texas, Austin Energy recently signed a PPA for 150 megawatts of solar for 5 cents per kilowatt-hour; in Colorado, Xcel Energy said it can buy electricity from 170 megawatts of solar plants for less than buying from natural gas plants; and in Utah, Rocky Mountain Power also signed deals for 80 megawatts of solar for less than gas.

“This is the first time that we’ve seen, purely on a price basis, that the solar projects made the cut — without considering carbon costs or the need to comply with a renewable energy standard — strictly on an economic basis,” said David Eves, CEO of an Xcel subsidiary, in an interview with the Denver Business Journal last year.

There is also a distributed system component of Georgia’s large solar program, which offers a 13-cent-per-kilowatt feed-in tariff for residential and commercial projects up to 1 megawatt in size. However, that program is not seeing the same level of activity as the utility-scale — partly because of its size, and partly because of incentive levels.

Some of the 11 megawatts devoted to projects of 100 kilowatts or less were rolled over into a 2014 solicitation because of limited activity. There were 45 megawatts bid on the commercial side last year, but 12 megawatts were folded into this year’s targets. Some solar companies believe the tariff is too low for residential and commercial installations, and also worry that incentives for smaller systems could soon change again.

Although there is still a contentious ongoing debate in Georgia about how to compensate distributed solar, this latest solicitation shows that the utility-scale solar market is moving ahead cost-competitively.

Georgia Power called the low pricing proof of “the robust nature of the marketplace.”

Turns out, President Obama and the Tea Party do agree on something: solar power can actually compete in a competitive market today.

Photo Credit: Solar Growth in Georgia/shutterstock

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Discussions

Keith Pickering's picture
Keith Pickering on Oct 17, 2014 7:23 pm GMT

Ummmm … solar can compete in the market, but only with a 13 cents/kWh FIT?

I’m not complaining about the FIT, mind you. It’s a good idea, and it promotes solar, which is good. But it’s a bit disingenuous to claim solar is competetive, while minimizing the very profound effect of the FIT on on the market. It’s a subsidy, and we need to remember that. Decarbonization can be cheap. But it won’t be free.

Nathan Wilson's picture
Nathan Wilson on Oct 17, 2014 10:03 pm GMT

PPAs at an average of 6.5 ¢/kWh for solar power are impressive.  A few comments:

  • Usually, there is no penalty if the developer doesn’t fulfill the contract, so the average could be pulled down by low bids for projects that will actually only go forward if costs fall more steeply than most others predict.
  • All of the bids are timed to complete construction before the Federal 30% investment tax credit expires at the end of 2016.
  • The 13 ¢/kWh residential FIT is more than double this utility scale PPA prices, but reduces transmission loss by less than 10%.

As the following solar PV resource map shows, Georgia is not in the desert (the low output compared to other regions at the same latitude represent power lost to clouds), hence nearly 100% backup power from fossil fuel plants will still be needed.

Keith Pickering's picture
Keith Pickering on Oct 18, 2014 3:40 pm GMT

Nathan,

I would also point out that PPA prices are not LCOE prices, because the PPA is more than just an energy-for-cash swap. It also transfers marketing risk from the producer (seller) to the distribution utility (buyer). Thus the seller is able to sell the energy at a discount because he is shedding risk in the process, and the buyer gets that discount by assuming the marketing risk. Essentially, PPA prices are about where LCOE price would be, assuming a zero discount rate.

Keith Pickering's picture
Keith Pickering on Oct 18, 2014 3:46 pm GMT

Regarding cost overruns, nuclear is still cheaper than solar, even after accounting for those overruns, and by a substantial margin. Regarding spent nuclear fuel, you are incorrect that this is an externality. The costs of spent fuel are internalized.

Regarding the “pain in the arse” of utility regulations, there simply wouldn’t be more than a tiny fraction of the existing solar in this country, nor anywhere else, without regulations to support the grid, and to support the pricing structure, upon which solar depends for its lifeblood.

Nathan Wilson's picture
Nathan Wilson on Oct 18, 2014 8:10 pm GMT

Society subsidizes nuclear with cheap capital.”

Yes cheap capital helps nuclear, but it also helps every other industry with high up-front cost (e.g. solar, wind, geothermal, and housing).  Free market interest rates are low across the boards, so it doen’t count as a subsidy.

Claiming long facility life is disingenuous..”

I agree that it has little relevance for investors building plants today, but it puts a huge downward push on the future cost of energy, hence it is a huge benefit to society.  Investors use a discount rate to quantify the extent to which they don’t care about the future.  I believe a core value of the environment movement should be caring a lot about the future (hence we should use low discount rates).

Generation 1 [nuclear] has degraded into a financial, social, political, terrorist, monopoly, and environmental nightmare.”

Assuming you mean Gen II, which produce most of our nuclear power, it has certainly been spun that way by anti-nuclear groups, but there is simply no objective basis for this.  It is enormously safer and better for the environment than the coal plants it displaced; the terrorism threat is just a bedtime story, since nukes are hard targets, and they are isolated from population centers by exclusion zones which mean that nuclear plant attacks will always means zero off-site casualties.

Sure, Gen IV will bring new advantages, but the Gen III reactors under construction today are so much better than plausible alternatives (fossil fuel or renewables with fossil backup) that we should not wait.  The SMR development programs (which are far enough along that they need customers) will be sufficiently market-friendly that the same subsidies that have allowed solar to prosper will allow them to reach non-monopoly power producers.

Keith Pickering's picture
Keith Pickering on Oct 19, 2014 4:29 pm GMT

The interest rate is what it is. And right now it’s low, which encourages long-term investment.

You’re arguing that the interest rate should be higher? Fine. But arguing won’t make it so.

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