Austin Energy, First Solar ink deal for 119 MW of solar

Dive Brief:

Austin Energy, the municipal utility for Austin, Texas, has signed a 15-year power purchase agreement (PPA) with major utility-scale solar developer First Solar for the installation of the 119 MW East Pecos Solar Project, PV Magazine reports.
The Austin Energy Resource, Generation and Climate Protection Plan to 2025 committed the city to a 55% renewables mandate as well as a 950 MW installed solar capacity; 750 MW will be utility-scale solar.
First Solar reports having a “robust pipeline” of Texas projects. It will own and operate the East Pecos project, which it says will go online in late 2016. That would make it eligible for the 30% federal investment tax credit before the incentive reverts to its pre-2006 level of 10% for commercial solar installations.

Dive Insight:

The Austin City Council just approved a compromise solar procurement of up to 450 MW by 2019 for Austin Energy. Some Austin leaders called for a doubling of the current 300 MW procurement target set to be completed by 2017.

The move would take advantage of the 30% federal investment tax credit (ITC) before it reverts at the end of 2016.

The installed cost of utility scale solar has fallen so significantly that Austin Energy leaders believe the reversion of the ITC wouldn’t seriously compromise the economics of project development. The utility has received contract offers for a 10% ITC that increase utility-scale solar project prices less than 2%.

Statistical modeling from the Lawrence Berkeley National Laboratory produced a levelized PPA price of about $43/MWh with a 30% ITC and a $54/MWh price with the 10% incentive, research scientist Mark Bolinger recently told Utility Dive.

“It is not clear demand will suddenly dry up if we go back to a 10% ITC in 2017," Bolinger added.

Earlier this month, the city council approved Austin Energy's PPAs for 300 MW of utility-scale solar. That approval allowed the utility to negotiate with East Pecos Solar for a 118 MW facility and other unnamed developers for an additional 182 MW. While the prices weren't finalized, Austin Energy said they would be less than $0.04/kWh, one of the cheapest solar PPA prices in the nation.