Solar is Cheaper Than Coal in New Mexico

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%.

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Comments on “Solar is Cheaper Than Coal in New Mexico”

  1. Jon

    So, solar is almost cheaper than coal only after taxpayers subsidize the project. Doesn’t sound very economical if everyone has to pay into the pot to make it competitive.

  2. Rona Fried

    Jon, please remember that coal and other fossil fuels all receive much bigger subsidies than solar – there’s no comparison. And coal plants don’t pay for the pollution they put in the air and water – we do.

  3. Tim

    Every energy source in the last 400 years of U.S. history has been subsidized. I do not agree with this approach, but facts are facts.

    When cost per kWh are quoted, there should be two quotes – subsidized and without subsidy. That way technologies could be compared on their merits. Average annual support for the oil and gas industry has been $4.86 billion (1918-2009), compared to $3.50 billion for nuclear (1947-1999) and $0.37 billion (1994-2009) for renewable energy. This is the reason that the nuclear industry can claim such a low base-load price per kWh. This is all about to change though. Under the Russian/US Megatons for Megawatts agreement, the US could purchase uranium from Russia for a 75% discount under market rate. This agreement is ending at the end of 2013. The subsidies will either have to go way up or the base load cost of nuclear will have to rise drastically.

    In my opinion, subsidies should be removed and the best technologies should win.

  4. Jay Alt

    Price was never the only consideration for utilities buying electric generation. They diversified, hedging against price changes for fuel costs. And to some degree – Operating & Maintenance costs. RE – wind & solar have some nice advantages in those areas.


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