Solar With Batteries Cheaper Than Gas in Parts of U.S. Southwest

(Bloomberg) -- Natural gas-fired power plants will be facing more price competition from solar farms in some parts of the U.S. as falling battery costs make it possible to deliver electricity produced from sunshine even after dark.

Solar projects that incorporate storage are becoming cheaper to build per megawatt-hour in parts of the U.S. Southwest than new gas-fired generation, according to a report Monday by Bloomberg NEF.

That positions solar to replace a significant portion of the 7 gigawatts of coal-fired power that’s expected to retire in the region over the next decade, said Hugh Bromley, a New York-based analyst at BNEF. And that trend will likely be repeated elsewhere.

“This won’t be contained to the Southwest,” Bromley said in an interview Monday. “This is spreading and will continue to spread.

Solar With Batteries Cheaper Than Gas in Parts of U.S. Southwest

Utilities that buy electricity from solar farms typically still rely on gas-fired generators in the evenings. But the increasing affordability of batteries -- thanks in part to a federal incentive -- is making solar compelling, even after sundown.

For example, a 100-megawatt solar farm that goes into service in Arizona in 2021, coupled with a 25-megawatt storage system with four hours of capacity, will be able to provide power for $36 a megawatt-hour, according to BNEF. That’s well below the $47 price from a new combined-cycle gas plant, according to the report.

“In the long-term, this is a threat to gas suppliers whose demand from utilities will be in decline,” Bromley said.

©2018 Bloomberg L.P.