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US solar-plus-storage prices plunge in utility contracting surge

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The Lawai Solar and Energy Storage Project in Hawaii is part of a growing fleet of battery-backed solar arrays.
Source: AES Corp.

U.S. utilities seeking new sources of peak power are turning to solar farms integrated with battery storage systems that save energy for later use, offsetting their reliance on conventional fossil fuel-fired generators, often at lower prices.

This trend is most apparent in Hawaii and the western U.S., where multiplying solar-plus-storage power purchase agreements, or PPAs, reflect a maturing class of competitively priced peak-power assets, according to an S&P Global Market Intelligence review of state regulatory filings, publicly available contracts and independent analysis.

Though project configurations and contract conditions vary, prices for large-scale solar farms coupled with big lithium-ion batteries, typically offering four hours of energy storage, have fallen to between $30/MWh and $40/MWh in several recent deals and contracts under negotiation.

Repeatable arrangements

Contracting activity for what one project developer, AES Corp., has called "PV peakers" has taken off in the southwestern U.S., for both PPAs and utility-owned projects.

In 2018, California community choice aggregators Monterey Bay Community Power and Silicon Valley Clean Energy announced agreements with developers of two large solar photovoltaic, or PV, plants integrated with battery storage in Kern and Kings counties, at prices revealed in a public meeting not to exceed $40/MWh.

The Slate Solar Project, which integrates 150 MW of PV with a 45-MW battery energy storage system, is scheduled to go online in June 2021 under separate 15-year contracts between Recurrent Energy LLC and the two aggregators, while EDF Renewables Inc. has 20-year agreements starting in December 2021 for the output of its Big Beau Solar+Storage Project, which includes 128 MW of solar and a 40-MW battery system.

"These types of arrangements are repeatable ... despite people telling me storage was not cost-effective yet," Monterey Bay Community Power CEO Tom Habashi said in an interview. The competitively priced projects help reduce the public agency's exposure to expensive short-term peak-power purchases, he added, and the energy storage component represents less than $10/MWh of the total contract price.

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In Nevada, as part of a decision that included the early retirement of an aging coal-fired generator, state energy regulators in December approved long-term deals between a utility affiliate of NV Energy Inc. and developers of three large solar-plus-storage projects with planned 2021 start dates. NextEra Energy Inc.'s Fish Springs Ranch Solar Farm and Dodge Flat Solar Energy Center, and Cypress Creek Holdings LLC's Battle Mountain Solar Project, have solar-only 25-year PPAs with Sierra Pacific Power Co. at fixed prices between approximately $27/MWh and $30/MWh, with additional 10- to 15-year capacity contracts for energy storage, according to a filing with the Public Utilities Commission of Nevada.

In a 2018 report, Lawrence Berkeley National Laboratory estimated the energy storage adder for those three projects at roughly $5/MWh. At an estimated $32/MWh to $35/MWh, including solar prices disclosed by the regulator and storage adders estimated by the national laboratory, the prices are around a quarter what NV Energy utility Nevada Power Co. is paying in its PPA for the output of the Crescent Dunes Solar (Tonopah Solar), a 110-MW concentrating power plant with up to 10 hours of molten-salt storage that went online in 2015.

As part of its Colorado Energy Plan to shift away from coal, Xcel Energy Inc., through its subsidiary Public Service Co. of Colorado, is seeking to finalize contracts for three battery-backed PV projects with "unprecedented low pricing" in the range of $30/MWh to $32/MWh, the utility said in a 2018 regulatory filing. Two of the three facilities include battery arrays 100 MW and larger.

"I don't know much lower prices can go," said Alex Eller, a senior research analyst at Navigant Consulting Inc. "We've had a race to the bottom going on here for some time."

Hawaii prices lower than fossil fuel projects

In Hawaii, which has the highest energy prices in the country and which has emerged as the proving ground for battery-backed solar arrays, six recently approved long-term PPAs between utility subsidiaries of Hawaiian Electric Industries Inc. and affiliates of AES Corp., Clearway Energy Inc., Hanwha Corp. and Innergex Renewable Energy Inc. range between $78/MWh and $99/MWh for projects contracted to start in 2021 and 2022.

While higher than other recent PPAs on the U.S. mainland, those prices are "significantly lower than the current cost of fossil fuel generation" in Hawaii, at roughly $150/MWh, Hawaiian Electric said in late March. Moreover, Hawaii's latest deals are priced well below previous contracts despite featuring substantially larger batteries.

For instance, the AES Kuihelani Solar & Battery Storage Project on Maui, contracted to start in 2021, includes a 60-MW PV plant paired with 60 MW of four-hour batteries. The project is underpinned by "a new model PPA," according to the Hawaii Public Utilities Commission, that gives Maui Electric Co. Ltd. "contractual flexibility to dispatch renewable energy facilities" in exchange for a monthly lump sum payment based on a PPA price just under $78/MWh.

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