The World's #1 Renewable Energy Network for News, Information, and Companies.
Untitled Document

New Mexico Solar Deal Details Point to Parity -- and Pain

Unusually public details about a newly signed solar project deal in New Mexico raise some interesting questions about the purchasing power of solar energy, how close it's getting to grid parity -- and just how much pressure is on upstream suppliers to fulfill that objective.

First Solar has acquired a 50-megawatt (MW) solar power project in New Mexico from the solar division of Element Power. The deal is billed as the state's largest solar project; it also, according to some unusually public information revealed in a regulatory filing, raises some interesting questions about the purchasing power of solar energy.

The Macho Springs Solar Project is on land leased from the New Mexico State Land Office in Deming (Luna County); it's expected to be completed in 2014. (Element Power also has a 50-MW wind project at Macho Springs, selling power to Tucson Electric Power.) Electricity will be purchased by El Paso Electric, which had sought more electric peaking resources for its current energy mix. In a statement, the companies said the project's PPA is still subject to regulatory approvals, which is expected to happen "in the first half of 2013."

In fact, a regulatory filing from the New Mexico Public Regulatory Commission (PRC) is already loose in the wild, revealing exactly what El Paso Electric is paying: 5.79 cents per kilowatt-hour (kWh). That's almost a third of the price that thin-film solar PV projects typically sell for (16.3 cents/kWh), says Bloomberg New Energy Finance, and less than half the 12.8 cents/kWh average price for new coal plants. That's also roughly half of what First Solar will get for its marquee solar projects: Antelope Valley, Topaz, and Agua Caliente, points out Maxim Group analyst Aaron Chew. (We obtained a copy of the official document; but a quick Google search will reveal it too.)

Bloomberg points out that El Paso Power will be submitting more information about whether any renewable energy credits are being applied to the deal to lower its cost. In an interview, Chew points out that New Mexico's performance-based incentives (PBI) will probably add 2-4 cents/kWh. Assuming manufacturing cost targets of $0.60, plus $0.80 adding in balance-of-systems costs, that suggests a system price target of $1.50/W. But don't forget to factor back in the undisclosed price that First Solar paid for this project in the first place, Chew points out. "It is hard for us to fathom how it could possibly build this project profitably," he says.

Paula Mints, founder and chief market research analyst at Solar PV Market Research, says PPA prices were ranging from 8-14 cents/kWh in 2012. Even on the high-end that's a tough pill to swallow for suppliers; at the low end it's brutal. Meanwhile, she points out crystalline silicon modules have been selling in the $0.65-$0.75/W range -- roughly the same, and with higher efficiency, than First Solar's manufacturing costs alone.

We've contacted First Solar for clarifications, though they've already publicly declined to comment on the details of this deal. The project will use First Solar's thin-film panels, since the company only does EPC for projects using its thin-film technology. To that end, Chew points out that First Solar's project pipeline is stocked for probably a year and a half, but he calculates that with the company's current capacity (1.6 GW, averaged to 450 MW a quarter) it needs to keep pulling in a lot more deals -- and maybe is willing to make a little less in this deal, or is making up the difference with other projects, to keep its factories humming.

Still, the big takeaway from this new deal is that El Paso itself "is still only paying six cents for solar out of pocket," Chew notes. That means two things: yet more evidence that solar energy is becoming more attractive and competitive; and that the economics are becoming severely compressed on the manufacturing side, even more than we knew.

Lead image: Price in a C clamp, via Shutterstock

Untitled Document

RELATED ARTICLES

Suntech Parent Company Buys Majority Share of US-based Suniva

Ehren Goossens Shunfeng International Clean Energy Ltd., the Hong Kong-based solar company controlled by billionaire Zheng Jianming,...

Sunrise in Pakistan as the Country Delves into Solar PV

Robert Harker Pakistan has joined the list of countries that are exploring solar power as a means to bridge critical energy generat...

Global Renewable Energy Roundup: China, Kenya, Turkey, India Seeking More Renewables

Bloomberg News Editors China is being encouraged by three industry groups to double the nation’s solar-power goal for 2020 to make up for sh...

Why Smarter Grids Demand Smarter Communications Networks

Mark Madden

Historically, utility networks and communications networks have had little in common.

PRESS RELEASES

Canadian Solar Announces Partnership in 200 MW Tranquility Solar Power Project

Recurrent Energy signed an agreement with Southern Power to partner on the Tranquility ...

AWS Truepower Announces Major Expansion of its Due Diligence Team in Response to Growing Market Demand

AWS Truepower, an international leader in wind and solar energy consulting and engineer...

20 days to GRC Annual Meeting & GEA Geothermal Energy Expo

The Geothermal Resources Council (GRC) has announced that it is only 20 days to go to t...

Array Technologies’ DuraTrack HZ v3 Continues to (R)evolutionize at SPI

Array Technologies, Inc. (ATI) prepares to showcase its recently launched tracking syst...

FEATURED BLOGS

NATiVE Recognized for Excellence at 2015 Greater Austin Business Awards

NATiVE Recognized for Excellence at 2015 Greater Austin Business Awards NEWS RELEASE AUSTIN, Texas – Aug. 27...

Solar Energy Means Jobs, Savings, and a Low-Cost Future [infographic]

There are a lot of utility-sponsored legislative and regulatory attacks on solar energy lately, and we put together t...

How To Get People To Do Stuff

It’s no secret that psychology and sales go hand in hand. If you understand the principles of human psychology ...

Get In The Groove

When we talk about strategies for boosting productivity, we often overlook the fact certain projects lend themselves ...

FINANCIAL NEWS

Jim is Contributing Editor for RenewableEnergyWorld.com, covering the solar and wind beats. He previously was associate editor for Solid State Technology and Photovoltaics World, and has covered semiconductor manufacturing and related industries, ...

CURRENT MAGAZINE ISSUE

Volume 18, Issue 4
1507REW_C11

STAY CONNECTED

To register for our free
e-Newsletters, subscribe today:

SOCIAL ACTIVITY

Tweet the Editors! @jennrunyon

FEATURED PARTNERS



EVENTS

Intersolar North America 2016

Exhibition: July 12 - 14, 2016; Conference: July 11 - 13, 2016 Intersola...

Intersolar Europe 2016

Exhibition: June 22-24, 2016; Conference: June 21-22, 2016 Intersolar Eu...

1-1/2 Day Photovoltaic System Fundamentals Workshop

Participants will learn how to assess the solar resources available at a...

COMPANY BLOGS

Pushing Beyond The Cushion

Efficiency projects are all too often viewed as “optional” o...

Less Is More

When you’re giving a presentation, one of the easiest things to do...

Captivology

One of the biggest challenges we face as efficiency sales professionals ...

NEWSLETTERS

Renewable Energy: Subscribe Now

Solar Energy: Subscribe Now

Wind Energy: Subscribe Now

Geothermal Energy: Subscribe Now

Bioenergy: Subscribe Now  

 

FEATURED PARTNERS