Luminant, one of Texas’ largest coal power generators, is joining the rush to build utility-scale solar farms in West Texas in another sign of the technology’s rapidly declining costs.
The Dallas-based power company is preparing to announce Tuesday that it has entered into a deal with developer SunEdison to buy the electricity from a sprawling 800-acre complex to be built south of Midland. At 116 megawatts, it is smaller than the largest of solar projects under development in Texas right now. But what makes it unusual is that it was undertaken not to meet a government mandate or a corporate sustainability goal but on pure economics by a company built around the burning of fossil fuels.
“If the financials are right, we’ll do it,” said CEO Mac McFarland. “This isn’t a big strategic change. We’re putting a marker down on solar, like we did on wind [energy] more than 10 years ago.”
The cost of solar energy has dropped dramatically in recent years, as Chinese factories turn out increasingly cheap, efficient panels at a fast clip. Once sought only as a means of reducing carbon emissions, the technology has found a niche among companies trying to protect against price spikes in generating electricity from fossil fuels.
Earlier this year, a power utility in Georgetown announced it had signed a deal for 150 megawatts of solar power, making it the first city in Texas to get all its power from renewable energy sources. Like Luminant, its management also said the deal was about economics, rather than the environmental motivation of cities like Austin.
Luminant, a subsidiary of Energy Future Holdings, did not disclose how much it would pay SunEdison for the electricity. But Austin Energy, that city’s government-owned utility, said earlier this year it had received bids on a solar deal of less than $40 a megawatt-hour. Last year the average price for electricity on the Texas grid was $41 a megawatt-hour.
“We’re hitting cost competitiveness in a number of markets. With continued growth, we’ll see continued cost reductions,” said Charlie Hemmeline, executive director the Texas Solar Power Association.