HOUSTON – A San Francisco firm said Thursday it snagged a contract to build the largest single solar power farm in Texas.
It’s the latest sign that cheaper solar panels and lower manufacturing costs have made the sun a compelling rival in an industry that once believed solar power was just an expensive science project.
Austin Energy, one of the nation’s largest city-owned utilities, handed San Francisco-based Recurrent Energy a contract to build 150 megawatts of solar capacity at a site in West Texas, where Recurrent expects its sun-harnessing farm to be operational in 2016. One megawatt can power 500 Texas residences under normal conditions, according to the state’s main grid operator.
While Recurrent would build the largest single facility in Texas, the total capacity in the 20-year deal is second to San Antonio’s agreement with OCI Solar Power to build several solar plants with a combined capacity of 359-megawatts, expected to funnel electricity to the city-owned CPS Energy by 2016.
“It’s all about economics,” Recurrent Chief Executive Arno Harris said in an interview with FuelFix. “We’ve come to a place where costs are so low that we can offer a competitive price” for electricity on the Texas grid.
Harris declined to outline the financial terms of the deal. But Recurrent was one of a handful of solar-power companies bidding on a $525 million contract to build a facility expected to have more than 500,000 sun-soaking photovoltaic cells on 1,000 acres of West Texas land.
The Austin American-Statesman and others had reported last month that SunEdison was a top contender for the deal. And indeed, Austin city documents say the city planned to authorize an agreement with SunEdison or another qualified bidder in a submission process that begin in October.
The city said its best offers were about 5 cents per kilowatt hour, possibly the cheapest solar-power deal in the United States to date, according to media reports.
Harris said solar-panel manufacturing costs have dropped by 60 percent to 70 percent in recent years, and the industry has become better at designing panels in ways that cut down on labor costs.
“We’re in the third generation for large-scale build outs” of solar technology, he said. “We’ve learned a lot about how to be more efficient.”
He added he has noticed more analysts in recent years saying solar power has moved into the mainstream of the power industry and, as it becomes more competitive with natural-gas fueled power plants, it’s becoming more evident that “solar is going to play a big role” in the United States.
Solar is starting to pick up steam around the world even though global investment in the renewable energy source has fallen in the past two years, said Letha Tawney, a senior associate at the World Resources Institute.
Citing a Bloomberg analysis, Tawney said about 80 percent of the slack in solar investments can be attributed to technology cost savings – it’s simply a lot cheaper to build solar panels than it was in 2008.
China and other countries have added much to the world’s solar capacity in recent years, investing in highly efficient plants and driving down the costs of materials. In the United States, a solar tax credit is expected to drop from 30 percent to 10 percent in 2016, a deadline that is expected to create a burst of solar investment over the next two years.
Tawney said she’s seen a recent increase in solar projects, not because utilities have to stay compliant with federal renewable fuel standards, but because “they’re beating out traditional generation sources.”
When utilities realize lower-cost solar projects “are better for their ratepayers, that’s the watershed moment,” she said. “When you cross that line, the market turns on its head.”