Idaho Power recently contracted 120MW of solar power for a headline-grabbing “world record” low price of 2.175 cents per kWh of electricity.
That figure is astoundingly low, one of a number clustered around that price point. But a closer look at the project’s precise conditions suggests that perhaps the current holder of that particular title need not worry.
In the fast-moving world of the solar industry, records often don’t last very long.
Technology performance landmarks often tumble as soon as they are set. Billionaires can make eye-racing fortunes and losses. One industry record appears to have run out of road for the time being and the Idaho Power deal is the pretender to the throne. It’s a credit to the solar industry that so many projects are being built around the world at prices pushes the boundaries of their respective markets’ limitations.
Other projects laying claim to this particular “record low” price include Dubai’s most recent phase of the Mohammed bin Rashid Al Maktoum Solar Park at 2.4 cents per kWh and the 300MW Sakaka project in Saudi Arabia at 2.342 cents per kWh.
In the U.S., the Eagle Shadow Mountain Solar Farm is priced at 2.376 cents over the course of its 25-year power purchase agreement (PPA).
A long line of projects in the south-eastern states have exchanged the title of lowest ever in the U.S. Many of these only hold the eye-catching price in the early years before a price escalator kicks in, again, that’s grounds for disqualification in my view. Idaho Power’s contract is for 20 years but it has the option to have the site expanded beyond the initial 120MW but in that case, the price shall rise.
The Idaho Power project has another major price advantage. It is being built “to replace” the (much larger) North Valmy coal power plant in Nevada and crucially, will utilize the grid connection vacated by the site as it undergoes a phased decommissioning process, starting this year. That means the substantial upfront costs of connecting the plant to the grid are avoided.
With completion not scheduled till 2022 it will also likely benefit from reduced component prices.
But there is an argument that all U.S. projects can’t really be compared fairly as they benefit from the 30% Investment Tax Credit (ITC).
A 2016 study by the National Renewable Energy Laboratory (NREL) estimated the impact of the credits on the levelized cost of energy (LCOE). That is the measure of the cost of the produced electricity when all factors have been considered, land costs, permitting, interest costs associated with any loans, the price and performance of the components used, etc. It found that the LCOE of large-scale solar projects were the ITC not in place, would be at least 15% higher.
In reality, comparing any two solar projects is a tricky exercise. The prices achieved in the Middle East have benefitted from other advantages, not least very low-cost financing and exceptional levels of sunshine. So while the Idaho project deserves kudos for exploiting the opportunity created by the coal plant closure, it perhaps has a few too many advantages working in its favor to put it at the top of the pile in good conscience. It’s a good job it’s not a competition.