Dive Brief:

• The Austin, Texas, City Council approved a compromise solar procurement of up to 450 MW by 2019 for its municipal utility, Austin Energy, while utility executives consider developing utility-scale solar projects rather than contracting with independent developers.
• Some Austin leaders called for a doubling of the current 300 MW procurement target set to be completed by 2017 to take advantage of the 30% federal investment tax credit (ITC) before it reverts to 10% at the end of 2016.
• Documentation for the Council’s decision puts the authorized annual cost of procuring up to 450MW at $17 million and the authorized total expenditure at $425 million. The Council stipulated the procurement may not increase customers’ bills over 1%.

Dive Insight:

The installed cost of utility scale solar has fallen so significantly that Austin Energy leaders believe the reversion of the ITC would not seriously compromise the economics of project development.

The utility has received contract offers for after the ITC reverts to 10% that increase utility-scale solar project prices less than 2% over offers made with the 30% ITC available. The expectation is that demand for solar will fall, driving down asset procurement prices and offsetting the reduced ITC with even lower installed costs.

Some analysts believe the ITC reversion will compromise the value proposition of utility-scale solar and the Solar Energy Industries Association (SEIA) is lobbying hard for extension.

Statistical modeling from the Lawrence Berkeley National Laboratory released last month produced a levelized PPA price of about $43/MWh with a 30% ITC, and a $54/MWh price with 10% incentive, according to research scientist Mark Bolinger recently told Utility Dive.

“A lot of contracts have been signed at that level," he said, "and it is not clear demand will suddenly dry up if we go back to a 10% ITC in 2017.”