Although new solar plants can't yet compete on price with legacy coal plants, we are nearing the point where their economics look better than those for new coal plants.
That's happening in New Mexico, where First Solar plans to sell solar electricity from its new 50-megawatt (MW) Macho Springs project to El Paso Electric Co. at 5.79 cents per kilowatt-hour (kWh).
That's less than half the 12.8 cents per kWh that new coal plants typically charge, and represents "the lowest power purchase agreement price we have seen," Maxim Group analyst Aaron Chew told Bloomberg.
For perspective, First Solar will get about twice that amount for its Antelope Valley, Topaz and Agua Caliente projects, says Chew.
Typically, thin-film solar electricity sells for 16.3 cents per kWh, according to Bloomberg New Energy Finance, but state and federal incentives are lowering the price.
New Mexico's state production tax credit adds about 26 cents per kWh over the first decade of operation, reports ThinkProgress. The Macho Springs project will also receive a 30% federal investment tax credit.
When you add in those credits, the prices are close to First Solar's California projects - slighly higher than 8 cents per kWh, says ThinkProgress.
"In fact, solar technology has been advancing so rapidly that analysts have had trouble keeping their models up to date," reports ThinkProgress. "When the Electricity Council of Texas revised the circa-2006 assumptions about the state of technology development in its economic models, it found massive increases in the economic viability of wind and solar power, making them competitive with natural gas in the state over the next 20 years. Energy Secretary Chu predicted in 2011 that, along with wind, solar would be no more expensive than oil or natural gas by the end of this decade."
The same is true for wind, which now supplies 6% of the power delivered to the US grid. In Michigan, the cost for wind is a third less than from a new coal plant.
While coal provided at least half of all US electricity 10 years ago, now it's down to 33%.