Xcel Attracts ‘Unprecedented’ Low Prices for Solar and Wind Paired With Storage
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.