Dive Brief:

• A Texas municipal utility last week announced a new power purchase agreement for 255 MW of solar energy at less than $25/MWh, one of the nation's cheapest ever solar deals.

• New Braunfels Utilities signed the 15-year PPA with Engie Long Draw Solar, which the utility said would deliver power during peak electricity demand hours and "allow NBU to maintain one of the lowest retail electric rates in the country."

• The exact PPA price was not released, but GTM Research noted it rivals other inexpensive solar deals signed recently in Texas, like a December 2017 Austin Energy PPA that the research shop said could be as low as $21/MWh.

Dive Insight:

The New Braunfels solar PPA is another example of how renewable energy is increasingly competitive with traditional generation sources, particularly in areas with good wind or solar potential, like Texas.

In November, investment firm Lazard estimated average utility-scale solar costs in the U.S. between $36/MWh and $44/MWh, challenging the average cost for existing coal plants, which it pegged between $27/MWh and $45/MWh.

The solar deal reported by the central Texas municipal utility will deliver significantly cheaper power when it comes online in 2020. Utility officials said its generation will also fit its customers' usage patterns well.

"Solar energy matches peak demand times, which run 3:00 – 7:00 p.m., during hot summer months, delivering energy when it is needed most," the company said in a release.

Solar's ability to deliver power during peak demand times in Texas helped the state's grid survive the high-demand summer months this year without any emergency events, despite a tight 11% reserve margin.

Going forward, analysts expect growing solar energy to decrease wholesale power prices in Texas, particularly diminishing peak pricing events during times of high energy demand that many fossil fuel plants rely on financially.

Fossil fuel generators have proposed rule changes in the market that would increase prices, which are opposed by consumer groups as well as clean energy and environmental organizations. Texas regulators earlier this month postponed a decision on the plan.

Outside of Texas, the competitiveness of renewable energy is spreading beyond the sunny southwest and windy plains states. In November, the Northern Indiana Public Service Co. (NIPSCO) released an analysis showing that it could save ratepayers $4 billion over 30 years by retiring two coal generators early and replacing them with nearly all wind and solar energy.