Dive Brief:
- Luminant, the biggest independent power producer in Texas and a subsidiary of energy industry giant Energy Future Holdings, contracted to buy the 116 MW output of a Texas solar project owned by SunEdison, the biggest utility-scale renewables developer in the world.
- This is the biggest solar purchase by a merchant generator in a competitive retail electricity market, and a change of strategy for coal-reliant Luminant. The generator's 2012 portfolio was 70% coal generation, 28% nuclear generation, and 2% natural gas generation.
- Luminant’s solar move was consistent with its focus on “projects that are profitable and able to compete in the wholesale market,” according to CEO Mac McFarland, who said that “solar generation costs have become increasingly competitive."
Dive Insight:
Luminant’s power purchase agreement (PPA) with SunEdison starts in late 2016, in time to qualify for the 30% federal investment tax credit. Another SunEdison solar project supplies the City of Georgetown, Texas, through a 150 MW PPA.
Others are contracting for the increasingly affordable output of Texas utility-scale solar projects. A request for proposals from municipal utility Austin Energy returned almost 8 GW of proposed new solar projects, nearly 1.3 GW of them priced below $0.04 per kWh. With the utility’s management expecting the price to fall as low as below $0.02 per kWh, leaders decided to accept a portion of the proposals, watch pricing trends, and consider developing its own utility-scale solar.
SunEdison is in an aggressive growth phase, adding over 1 GW of renewables generation to its portfolio quarterly. Last year, it acquired First Wind, one of North America’s top wind developers, and it recently added Vivint Solar, the second-biggest U.S. residential PV installer. TerraForm Power, its yieldco subsidiary, is helping fund growth by purchasing completed projects, to keep capital available to the developer, and remonetizing them through bond offerings.
