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New Mexico To Purchase Solar Energy At a Lower Price Than Coal

Joseph Romm's picture
American Progress
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  • Feb 4, 2013 7:50 pm GMT

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The economic viability of solar power is advancing rapidly. It’s actually already more then competitive within certain markets, and the price of solar panels saw a precipitous decline over the last four years.

In fact, solar technology has been advancing so rapidly that analysts have had trouble keeping their models up to date. When the Electric Reliability Council of Texas revised the circa-2006 assumptions about the state of technological development in its economic models, it found massive increases in the economic viability of wind and solar power, making them competitive with natural gas within the state over the next twenty years. Former Energy Secretary Steven Chu predicted in 2011 that, along with wind, solar would be no more expensive than oil or natural gas by the end of the decade.

The latest evidence of solar power’s rise comes via Bloomberg: El Paso Electric Co., a southwestern utility, has agreed to purchase electricity from a New Mexico solar project owned by the solar panel manufacturer First Solar, for a price lower than the going rate for coal:

First Solar bought the 50-megawatt Macho Springs project from Element Power Solar, according to a statement yesterday. El Paso Electric Co. (EE) agreed to buy the power for 5.79 cents a kilowatt-hour, according to a Jan. 22 procedural order from the New Mexico Public Regulation Commission.

That’s less than half the 12.8 cents per kilowatt-hour average price for new coal plants, according to data compiled by Bloomberg. Thin-film photovoltaic power typically sells for 16.3 cents a kilowatt-hour, according to Bloomberg New Energy Finance.

The price would be “the lowest solar power purchase agreement price we have ever seen,” Aaron Chew, an analyst at Maxim Group LLC in New York, said in an e-mail. It’s less than half the price that First Solar will get for its Antelope Valley, Topaz, and Agua Caliente projects, he said.

The Macho Springs project is just the latest in over 50 megawatts worth of solar projects First Solar has built in New Mexico since 2011, and the company is slated to install another 21.5 megawatts by late 2013. First Solar even developed the first solar project to reside on public U.S. lands: the 50-megawattSilver State North installation outside of Primm, Nevada, which began generating electricity this past May. And its 250 megawatt installation in Yuma County, Arizona was the largest solar plant operating in the world as of October, 2012.

First Solar is also the largest maker of thin-film solar panels in the world, and its panels — which will be used in constructing the Macho Springs project — boast the smallest carbon footprint and shortest energy payback time of any solar technology currently available.

Zooming out to the larger picture, analysts anticipate American solar power will soon account for 10 percent of the world market, given the industry’s 70 growth rate over the course of last year. Installations of solar panels surged in 2011 as industry analysts predicted the price of solar-generated electricity would quickly come to rival that of coal. By December 2012, U.S. solar installations had increased 116 percent over the same period in 2011, bringing sufficient capacity to power about half a million average American homes. And according to a census by the Solar Foundation, the sector currently employs over 119,000 Americans — an increase of 13,872 workers over 2011.

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Bob Meinetz's picture
Bob Meinetz on Feb 4, 2013

Unless I'm missing something here, the only reason First Solar can afford to sell it for that low price is because of New Mexico's $.27/kWh Production Tax Credit - making its "real" price about 2.5 times that of coal.

I would love to be corrected on that.

Paul O's picture
Paul O on Feb 4, 2013

While I'm all for cheaper Solar Power (Would be great to be able to afford roof top panels on top of my House),  I do wish the writer would have addressed certain issues and not make this a Rah! Rah! for Solar Power article.

1) The Writer has said nothing about the real Estate of the Solar farm. Is it State Land, was it donated or purchased, Was the cost of aquiring the land rolled into the pricing or not.

2) What's New Mexico doing for Night Time and lower sunshine periods?

In other words, does the pricing for solar here represent real word prices or is it artificially reduced to encourage Solar Power?

Pete Danko's picture
Pete Danko on Feb 4, 2013

Bob: You appear to have overstated the New Mexico production tax credit by a factor of ten -- it average 2.7 cents per kilowatt-hour, not $.27/kWh. See the GTM story:

Pete Danko's picture
Pete Danko on Feb 4, 2013

Like many power projects of all sorts, this one is located on land leased from a public agency (in this case, from the New Mexico State Land Office, according to First Solar). The utility buying the power, El Paso Electric, like most utilities, appears to have a range of sources, including natural gas and coal-fired generation, nuclear, other solar and wind.


Bob Meinetz's picture
Bob Meinetz on Feb 4, 2013

Thanks, so I have.

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