An Xcel Energy solicitation set a new solar-plus-storage record after attracting a median price of $36 per megawatt-hour.
The rate is 20 percent lower than the cheapest PV-plus-battery power-purchase agreement seen to date, which came in a NextEra Energy Resources contract for Tucson Electric Power signed in May last year, at $45 per megawatt-hour.
The NextEra deal, which included 4 hours of lithium-ion battery-based storage, saw flow battery maker ViZn Energy Systems promising to deliver solar-plus-storage at a cost of $40 per megawatt-hour, still 9 percent above the median rate seen in the Xcel bid.
(Note: ViZn has subsequently pointed out that its pricing was for 2019. By 2023, the company expects to deliver energy storage at a price of $27 per megawatt-hour.)
GTM Research Advisor Shayle Kann said on Twitter that although the Xcel pricing came with “lots of caveats,” it is “incredible nonetheless.”
Vibrant Clean Energy CEO Dr. Christopher Clack, who last year tangled with Stanford University Professor Mark Jacobson over pathways to a 100 percent renewable energy system, tweeted: “What fabulous numbers!”
The bids for wind-plus-storage were even lower, with a median price of $21 per megawatt-hour. The Xcel figures are also well below the unsubsidized levelized cost of energy (LCOE) for wind and solar published by Lazard last November.
The financial advisory firm estimated the current LCOE for utility-scale solar-plus-batteries to be $82 per megawatt-hour. Lazard did not calculate an LCOE for wind-plus-storage.
Lazard's estimates for wind LCOE alone were higher than Xcel’s wind-plus-storage median bid rate, with a range of $30 to $60 per megawatt-hour.
GTM Research’s director of energy storage, Ravi Manghani, said it is clear that Xcel’s bidders were expecting significant solar, wind and battery cost reductions between now and when the projects are due to go online, in 2023.
“There’s still five years and a few months before they become operational,” he said. “The industry is looking to ride on the cost curve.”
Developers are facing a major challenge. In 2023, the U.S.' federal solar Investment Tax Credit is due to drop from 30 percent to 10 percent. “There’s going to be a balancing act,” said Manghani. “The industry expects the costs will decline faster than the ITC.”
Xcel published a 30-day report on the outcome of its 2017 all-source solicitation at the end of last month. Part of the company’s 2016 Electric Resource Plan, the solicitation looked to find bidders for around 615 megawatts of new generation in Colorado.
In its 30-day report, Xcel said the response had been “unprecedented,” bringing in 430 proposals relating to 238 projects (since some developers submitted multiple proposals per project).
“For comparison, the company received 55 bids in the 2013 all-source solicitation,” said Xcel.
Wind and solar -- with and without storage -- were present in 358 bids, amounting to 101 gigawatts out of almost 112 gigawatts of generation proposed overall.
Xcel did not provide details of each proposal but published the median levelized price of the bids received for each generation type. It defined median as “the midpoint of the pricing such that 50 percent of the bids are lower priced and 50 percent are higher priced.”
Wind came in lowest, at $18.10 per megawatt-hour. It was followed by combined wind and solar, at $19.90; then wind with battery storage, at $21; PV alone, at $29.50; then wind, solar and battery storage, at $30.60.
Wind also came out ahead in terms of generation volume, accounting for more than 42 gigawatts of bid proposals and 17 gigawatts of projects, compared to PV’s nearly 30 gigawatts of bids and 13+ gigawatts of project capacity.
PV was, nevertheless, the preferred option in terms of number of projects. Standalone solar was proposed in 152 bids and 75 projects. A further 87 bids and 59 projects were for solar-plus-storage. It remains to be see how many, if any, will be chosen.
Xcel is not expected to confirm its bid selections until April. For now, though, “the number of solar-plus-storage projects is a promising sign,” said Manghani.
“The storage industry is much more mature here in the U.S. than in other markets,” he said. "So the cost curve the industry is relying on is much more likely to be achievable, even if you factor in lower labor costs elsewhere.”
Join us for the 11th annual Solar Summit 2018 in San Diego, May 1-2. Powered by the unique blend of research and economic analysis from the GTM Research team, this year's agenda will feature themes from beyond traditional project finance to innovations in solar and the transformation of electricity.