Originally posted on January 8, 2014 in Law and the Environment.
According to ClimateWire on Tuesday, a Minnesota state administrative law Judge’s recommendation to the state Public Utility Commission may be the first time that a solar project has been declared cost-competitive against natural gas in an open bidding situation. That might be a little bit hyperbolic, given that Xcel Energy, which would be purchasing the power, has an obligation to significantly increase its solar portfolio and the decision recognized the economic value of the solar renewable energy credits that the recommended winner, Geronimo Energy, would produce. Nonetheless, if affirmed, it will be an important decision and is certainly a sign that the economics of solar energy are improving. After all, the opinion does state that:
The record in this proceeding indicates that Geronimo’s proposal, when properly analyzed , is the lowest cost resource proposed.
The opinion is worth reading, because it highlights some of the developments in this area and some of the advantages that the Geronimo proposal had. First, there was significant question just how much power Xcel would in fact need over the relevant time period. The Geronimo proposal was for a distributed solar project that would include up to 20 sites, at 2-10 MW/site, for a total of 100 MW of AC current. This was smaller than any of the proposed gas projects. The judge clearly was not convinced that all of the power from these larger projects would be needed. He referred multiple times to the need for “scalable”projects.
Geronimo also emphasized the reliability of the project. All of the installations would be located near existing substations and make use of existing transmission lines. Obviously, outages in one area would not necessarily affect the remaining generation from the project. This was not the only economic advantage of the solar project. The opinion concluded that:
When one accounts for avoided energy costs, avoided capacity costs, avoided transmission costs, the impact of emissions and the cost to Xcel from transmission line losses, the benefits of Geronimo’s proposal amounts to a savings of $46 million of net present value of societal costs.
The recommendation does have to be adopted by the PUC, and I suspect that that is by no means certain, since the DPU recommendation was for one of the gas-fired projects. Even so, parity is coming, particularly where the analytical methodology takes social costs, i.e., externalities, into account.