Dive Brief:

• Tucson Electric Power has signed a power purchase agreement for a solar-plus-storage system at "an all-in cost significantly less than $0.045/kWh over 20 years," according to a company official. Exact prices are confidential, but a release pegged the PPA for the solar portion of the project at below $0.03/kWh.

• The project calls for a 100 MW solar array and a 30 MW, 120 MWh energy storage system, both developed by an affiliate of NextEra Energy. If the pricing proves accurate, it would represent a major cost reduction for combined storage facilities since the signing of the last significant PPA — a $0.11/kWh Hawaii contract in January.

• The PPA would confirm a forecast in Arizona's proposed "Clean Peak Standard" that solar-plus-storage facilities could compete with gas peakers on price. But TEP does not support the proposal, now on hold with regulators, and Energy Supply Director Carmine Tilghman said batteries do not provide the same capabilities as peaker plants. 

​Dive Insight:

TEP is moving ahead with plans for an array of renewable energy resources and energy storage initiatives, even as the state’s regulatory framework adjusts to the new resources.

Last fall, Arizona's utility consumer advocate proposed the Clean Peak Standard, seeking to allow energy storage charged by renewables to compete with gas-powered peaker plants. 

That proposal noted a 2015 solar-plus-storage PPA signed in Hawaii for $0.145/kWh. At that price, it posited, the clean generation could compete with conventional peakers in Arizona, which produce power close at to $0.20/kWh.

The proposal was endorsed by a sitting regulator and spawned two bills for similar market constructions in California.

If the combined solar and storage PPA price provided by Tilghman proves accurate, it would confirm the proposal's assumption that dispatchable renewables can challenge peakers on price. But this week, the Arizona Corporation Commission put the proceeding on hold last week until a final decision is made on net metering rates in a separate utility rate case. 

That's welcome news to Tilghman, who said it's a mistake to compare batteries to peaker plants. 

"Storage provides the ability to simulate 'load' by allowing us to charge during the day and minimize the 'duck curve' issues, but [batteries] still have significant limitations to both peak shaving (which can easily be longer than 4 hrs) and use (1 cycle per day)," he wrote to Utility Dive in an email. "They each have a purpose and should not be compared to each other and as replacement for one another."

With or without the standard, TEP is moving ahead on storage. The utility has three storage demonstration projects under way totaling about 22 MW, and is including storage in its integrated resource plan that is headed for a hearing late next month, according to TEP spokesman Joe Barrios.

TEP is working toward sourcing 30% of its electric power from renewable resources by 2030, and it sees storage as a way of smoothing out the intermittency of solar and wind power.

The newly announced project “speaks to the idea that the cost of large-scale solar is going down” and getting more feasible for utilities, said Barrios.

The NextEra affiliate will take advantage of the 30% federal investment tax credit for both the solar and storage facilities, with the "less than $0.045/kWh" being the price to the utility, Tilghman confirmed.  

The most recent major solar-plus-storage PPA was signed at $0.11/kWh by the Kauai Island Utility Cooperative in January. That project — 28 MW of solar and 100 MWh of batteries — will displace the utility's current oil-fired baseload generation. 

The TEP project, slated for a site owned by the city of Tucson, is set to be online by the end of 2019. It would be TEP’s largest dedicated renewable energy resource.

This post has been updated to confirm that the developer will monetize the federal ITC for both the solar and storage facilities.