First Solar (FSLR), the PV module maker and solar engineering, procurement, and construction firm, continues to push its gigawatt-scale project pipeline forward.

The thin-film solar manufacturer and project developer just announced that the New Mexico State Land Commissioner, Ray Powell, approved the power purchase agreement (PPA) from the New Mexico Public Regulatory Commission. First Solar can now start building New Mexico's largest solar power plant, to be sited on about 500 acres of State Trust Land in Luna County. The PPA will furnish 50 megawatts of solar power to El Paso Electric for 25 years.

A release notes that "First Solar has submitted its final development plan that provides a site plan and specific mitigation plans and strategies, and is obtaining various construction permits. Once approved, construction is expected to begin in July."

What is notable about the Macho Springs project is the PPA price.

The price of a solar power purchase agreement is usually confidential information. But in the case of the Macho Springs solar project, acquired by First Solar from Element Power, the PPA price was disclosed (by mandate) at $57.90 per megawatt-hour. 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 New Mexico's Energy, Minerals and Natural Resources Department (EMNRD), the incentive averages 2.7 cents per kilowatt-hour annually.

Here's the schedule for the PTC via the Database of State Incentives for Renewable Energy (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 is available 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 2 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)
  • EPC Firm/Module Supplier: First Solar (CdTe modules)
  • Construction jobs: 300 (estimate at peak)