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In light of shockingly low Mexican solar electricity prices, should Sunshot program change its targets?

March 31st, 2016 · No Comments

When Secretary Chu announced the Department of Energy’s SunShot program in February 2011, many (okay, most or nearly all)

Sunshot program: utility solar target

Sunshot program: utility solar target

energy (related) analysts thought that the target of $0.05 per kilowatt hour for large-scale solar electricity delivery to the grid was beyond simply ambitious.  Great, perhaps, to have a stretch goal but I can recall multiple conversations where (highly?) knowledgeable people expressed great skepticism.

Since then, plunging solar prices and skyrocketing penetration have made that ‘stretch goal’ into a very conservative and rather pessimistic target.  The latest indication:  just finished bidding for Mexican solar electricity from industrial facilities has come in at less than 5 cents per kwh:

 In a sign of how quickly the energy economics are shifting Mexico took the lead in the race for one of the lowest ever recorded $ per MWh for a solar project in the World.

$40.5 MWh was the average price for a solar project and is incredible and showing a huge 30% jump from the previous record holder Austin Energy in Texas bid of $57.1 MWh (… this was still lower than the famous $57.8 MWh paid by ACWA Power in Dubai in 2014).

To translate, $40.50 per megawatt hour is $0.0405 per kilowatt hour (e.g., 4.05 cents per kWh).

This is 2016 and Mexico will see solar facilities built providing electricity to the grid 20 percent below the Sunshot program’s target.

Several months ago, with US solar pricing already down to 5 cents per kWh (okay, after various support programs), RUMINT (rumor intelligence) suggested that DOE was considering lowering the SunShot target … to as low as 3 cents per kilowatt hour.

Plunging solar prices suggests that might be the right thing to do.

The Mexico bid process also had impressive wind figures.

wind was down to $43.9 which is also amongst the lowest ever recorded price for energy. Some Midwest USA wind farms have reached $32 MWh but in Latin America where the weighted average cost of capital is considerably more than in the US, no one thought that renewables could be built this cheaply. This follows Peru’s recent power auction in January 2016, which also saw wind prices fall to only $48 MWh

….

The message is clear, renewables are now clearly cheaper than fossil fuels and set to go even lower with some analysts predicting $20 MWh!

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Tags: electricity · Solar Energy