SunEdison Inc., the biggest clean-energy developer, began construction on a Colorado solar farm that will be the largest in the state and comes out ahead in direct competition with natural gas.

The 156-megawatt Comanche solar farm will deliver power to Excel Energy Inc.’s Public Service of Colorado utility under a 25-year agreement, Maryland Heights, Missouri-based SunEdison said in a statement Thursday. The utility awarded the contract through an open solicitation, with the solar farm beating out other power sources including gas, SunEdison said.

The deal shows that renewable energy is increasingly able to compete on price with fossil fuels. Utilities that are planning for future demand growth are looking more carefully at solar panels and wind turbines, which will be cheaper to operate over the next few decades in part because they have no fuel costs, said Julie Blunden, chief strategy officer at SunEdison.

“We actually can offer solar and wind that’s cheaper than gas,” Blunden said in a phone interview Thursday. “It’s such an important inflection point. We can sell power without any fuel-price risk.”

State Policy

Buying power from Comanche will also help Public Service of Colorado meet state policies that require investor-owned utilities to get 30 percent of their power from renewable sources by 2020, according to the Database of State Incentives for Renewables & Efficiency, operated by North Carolina State University.

Public Service of Colorado told regulators in a 2013 report it had received proposals for solar photovoltaic power that was competitive with gas priced at $5.90 per million British thermal units over a 20-year period. Another project was competitive with gas at $5.96 over 25 years.

While the redacted report doesn’t identify the solar farms, Blunden said Comanche was one of the power plants that received contracts through the 2013 solicitation process.

Natural gas for delivery on Friday to the Denver area was $2.55 per million British thermal units, according to data from Intercontinental Exchange Inc.

Rising demand as new gas plants come online over the next few years will likely increase that price. The utility’s base gas forecast shows prices exceeding $6 by about 2020.

“For the first time, the company received bids for utility-scale solar PV resources that are cost-effective head to head with natural-gas fired generation,” Public Service of Colorado said in the report.

©2015 Bloomberg News

Lead image: Solar Farm. Credit: Shutterstock.