The price of a solar power purchase agreement (PPA) is usually confidential information. 

In the case of New Mexico's 50-megawatt Macho Springs solar project, just acquired by First Solar (FSLR) from Element Power, the PPA price was disclosed (by mandate) at $57.90 per megawatt-hour. The project is permitted and awaiting regulatory approval.

That 5.79 cents per kilowatt-hour is a low number, close to the price of an existing coal plant, and seemingly half of what has typically been paid for projects of this nature.

From the recent New Mexico Public Regulation Commission Procedural Order:

Shayle Kann, Director of Research at GTM, said, "This is an extremely low PPA price for a project of this size and with this delivery date (May 2014). Comparably sized projects in California have PPAs generally above 8 cents per kilowatt-hour before incorporating time-of-use (TOU) factors -- and those are mostly for delivery in 2016 or 2017. However, note that the project will likely be eligible for New Mexico's state production tax credit (PTC), which will effectively add something like 2.5 cents per kilowatt-hour to the system's revenue for the first ten years."

In fact, according to the EMNRD, the incentive averages 2.7 cents per kilowatt-hour annually.

Here's the schedule for the PTC via DSIRE:

  • Year 1: 1.5 cents per kilowatt-hour
  • Year 2: 2 cents per kilowatt-hour
  • Year 3: 2.5 cents per kilowatt-hour
  • Year 4: 3 cents per kilowatt-hour
  • Year 5: 3.5 cents per kilowatt-hour
  • Year 6: 4 cents per kilowatt-hour
  • Year 7: 3.5 cents per kilowatt-hour
  • Year 8: 3 cents per kilowatt-hour
  • Year 9: 2.5 cents per kilowatt-hour
  • Year 10: 2 cents per kilowatt-hour

More information on New Mexico's PTC from DSIRE here and at the New Mexico Energy Conservation and Management Division.    

Adding the average annual PTC to the PPA price totals 8.49 cents before the TOU adder -- still less than the 12.8 cents per kilowatt-hour average price for a new coal plant, as per Bloomberg. There's an ITC to be factored in as well.

This is clearly not a case of First Solar working in unsubsidized markets as it aims to, for example, in Chile.

Some details on what will soon be New Mexico's largest PV project:

Macho Springs Solar Project

  • Developer: Element Power (Element has more than two gigawatts of solar in development)
  • MWdc: 57.5 megawatts
  • MWac: 50 megawatts
  • Location: Deming, NM (Luna County) on land leased from the New Mexico State Land Office
  • Expected Completion: 2014
  • Owner: First Solar
  • Power Offtaker: El Paso Electric (NYSE: EE) (5.79 cents per kilowatt-hour; PPA subject to regulatory approval, expected in the first half of 2013)
  • EPC Firm/Module Supplier: First Solar (CdTe modules)
  • Construction jobs: 400 (estimate at peak)