Southern Company buys 157MW Roserock Solar Farm in Texas

That’s great, but how about more of those hundreds of construction jobs and operation money right back here to Georgia? But since you’re buying solar power, why do you need to buy a pipeline company? How about helping us against Sabal Trail invading us from Texas through Southern Company territory?

Southern Company PR, 30 November 2015, Southern Company subsidiary acquires first solar project in Texas,

Southern Company subsidiary Southern Power today announced the acquisition of a controlling interest in the 157-megawatt (MW) Roserock solar facility—the company’s first solar project in Texas—from Recurrent Energy, one of North America’s largest solar developers. The latest addition to one of America’s largest renewable portfolios, the facility is being developed by Recurrent Energy, a subsidiary of Canadian Solar Inc., which will retain the remaining interest in the project.

“Southern Power’s first solar project in Texas helps further the company’s robust wholesale business and further expands our solar footprint,” said Southern Power President and CEO Oscar C. Harper. “With strategic acquisitions nationally, the continued development of industry-leading assets aligns with our company’s low-risk strategy and enhances one of America’s largest renewable portfolios.”

Representing Southern Power and Recurrent Energy’s second partnership arrangement, the project, currently under construction, is expected to enter commercial operation in the fourth quarter of 2016.

“Cost-competitive, large-scale solar power has enormous potential in Texas,” said Canadian Solar Inc. Chairman and CEO Shawn Qu. “The Roserock project and Recurrent Energy’s solar project pipeline in the state are each important steps forward as Texas approaches the more than 13 gigawatts (GW) of solar that has been forecasted across the state.”

Texas will end up with a lot more solar power than that, but this is a good step forward.

This seems a bit odd:

The electricity and associated renewable energy credits generated by the facility will be sold under a 20-year power purchase agreement with Austin Energy.

Is Southern Company realizing it has the deep pockets to build solar plants and sell the power for profit to customers? That’s a good thing, if so.

Look at the price AustinEnergy is paying. Cynthia Shahan, CleanTechnica, 21 May 2014, Austin’s Super Cheap Solar Agreement (5¢/kWh) Goes To Recurrent Energy, Not SunEdison,

It was announced in March that Austin Energy would likely be buying electricity from a SunEdison solar power plant for less than 5¢/kWh under a 25-year power purchase agreement (PPA). If you’re not familiar with electricity prices, that’s really low. The final deal was just completed last week but with an unanticipated move — Austin Energy closed negotiations with Recurrent Energy. The Recurrent Energy press release explains that it received “an award from Austin Energy for 150 MW of solar capacity in West Texas. The power will be delivered to Austin Energy pursuant to a 20-year Power Purchase Agreement.”

Colquitt EMC pays me 4.5¢/kWh for solar electricity I generate, saying that’s their avoided cost, meaning that’s that Colquitt claims they would have to pay to generate the same power through other means, most likely via burning natural gas. So 5¢/kWh is down in that range.

Larry Weis, Austin’s Energy General Manager, and Arno Harris, Recurrent Energy’s Chairman and CEO, further explain:

“With our largest utility scale solar award, we are taking an important step towards meeting our goal of acquiring 200 MW of solar energy by 2020,” said Larry Weis, Austin Energy General Manager. “Solar power has reached a price that is competitive in the ERCOT market, allowing us to further diversify our energy portfolio with renewable resources.”

“The Texas market represents one of the most exciting opportunities for the solar industry,” said Arno Harris, Chairman and CEO of Recurrent Energy. “The industry’s growing scale and decreasing costs are enabling us to successfully compete against conventional energy in deregulated markets like ERCOT. This award from Austin Energy further proves solar’s ability to move into the mainstream energy mix.”

The CleanTechnica article adds that Austin Energy, after initially looking for a 50 MW solar power plant, went with 150 MW for a reason. Price could be part of that reason; the article says the previous low price solar plant record was 5.8¢/kWh. Solar prices are falling so fast there’s no reason to build anything else (except wind for balancing).

Meanwhile, also in Pecos County, Texas, First Solar (FSLR) has the existing 22MW Barilla solar farm which it is expanding to 50 MW, and the Pecos County Commission heard 30 October 2014 that FSLR plans to build another one near Girvin for 100 MW. That Girvin FSLR plant is near the Roserock CSIQ one.

And apparently even Texas has realized that solar power is a better deal even than wind power, and both together are better yet. Bob Seal, Fort Stockton Pioneer, 30 October 2014, County approves new solar site, eyes golf fees,

During his presentation to the court, Doug May, Executive Director of the Fort Stockton Economic Development Corporation, which contracts with the county, discussed a report by Texas Comptroller of Public Accounts Susan Combs. May said that the report did not include the photovoltaic industry in its recommendation that local governments no longer offer tax abatements to wind farm developments.

Combs’ rationale for that recommendation was that wind power generation is intermittent and that the renewable energy industry needs to concentrate on power storage technology “so that it can provide reserve capacity available to the grid during peak demand.”

Photovoltaic plants generate peak power at about the same time as the peak demand for electricity, that is, on sunny summertime afternoons.

The Comptroller’s State Energy Conservation Office web site states, “Because solar and wind generation in west Texas generally occur at different times (solar during the day, wind generation at night), combining solar power plants with wind farms has the potential to result in fuller utilization of transmission capacity and improved matching of generation to utility loading, including peak loading conditions.”

Included in some discussion of subsidies (wind and solar get far less than fossil fuels), there’s this gem:

According to the Comptroller web site, Texas state high-cost natural gas severance tax exemptions in 2006 alone totaled $1.1 billion.

And of course there’s a reason why Southern Power might find Texas an especially good place to build solar power and sell the electricity. Texas has its own electrical grid, with no need to mess with FERC:

Solar facilities here feed their power into the Electricity Reliability Council of Texas (ERCOT) grid. Pecos County lies in the western — sunny — part of that grid. The ERCOT grid supplies power to about 90 percent of Texas’ electric load. All the state’s major urban areas benefit from the renewable energy produced here.

Not being a financial expert (although I do own stock in both Southern Company and CSIQ), I have to wonder about this additional press release from Recurrent Energy today, CANADIAN SOLAR SUBSIDIARY RECURRENT ENERGY SECURES DEBT FINANCING FOR 157 MW TEXAS SOLAR PROJECT,

GUELPH, Ontario, Canada, November 30, 2015 — Canadian Solar Inc. (the “Company”, or “Canadian Solar”) (NASDAQ: CSIQ), one of the world’s largest solar power companies, today announced that its wholly owned subsidiary, Recurrent Energy, one of North America’s largest solar project developers, has closed on a combined construction and term debt facility, with a syndicate of five banks, for the 157.5 megawatt (MW)ac/ 212 MWp Roserock solar project in Texas. The project, developed by Recurrent Energy, is currently under construction. The electricity generated by the facility will be delivered to Austin Energy pursuant to a 20-year Power Purchase Agreement.

With KeyBank as the Coordinating Lead Arranger, five banks, including Rabobank, Santander, NORD/LB, and CIT will provide project-level construction debt, LC facilities and a back-leveraged term facility, totaling approximately $275 million.

“This top tier group of financiers’ attraction to the Roserock solar project is a clear indication that large-scale solar can compete and succeed in competitive energy markets like Texas,” said Dr. Shawn Qu, Chairman and Chief Executive Officer of Canadian Solar. “This agreement is a testament to our broader team’s ability to deliver bankable solar projects with strong fundamentals.”

“This is our fourth transaction with Recurrent Energy in 2015. We are proud to continue our working relationship and view Roserock as a strong investment in the fast growing Texas solar market,” said Andrew Redinger, Managing Director and Head of KeyBanc Capital Markets Utilities, Power & Renewables Group.

So Southern Power let CSIQ do all the financial organizing and then bought into a lucrative project after it was already financed? Or did Southern Power have some role in the financing that’s not spelled out in these obviously coordinated press releases on the same day?

Ah, Recurrent’s other PR of today sheds a little light, CANADIAN SOLAR SUBSIDIARY RECURRENT ENERGY PARTNERS IN 157 MW TEXAS SOLAR PROJECT,

GUELPH, Ontario, Canada, November 30, 2015 — Canadian Solar Inc. (the “Company”, or “Canadian Solar”) (NASDAQ: CSIQ), one of the world’s largest solar power companies, today announced that its wholly owned subsidiary, Recurrent Energy, one of North America’s largest solar project developers, signed a partnership agreement with Southern Power, a subsidiary of Southern Company. The agreement gives Southern Power a controlling interest in the Roserock solar photovoltaic (PV) project in Texas. The 157.5 megawatt (MW)ac/212 MWp project, developed by Recurrent Energy, is now under construction in West Texas.

Under the terms of the agreement, Southern Power will acquire 51% of the equity in the solar generation project. Canadian Solar will retain 49% ownership and contribute its share of the investment required to complete the construction of the project, which the Company has financed through a construction and back-leveraged loan facility with a syndicate of five banks.

So it looks like Recurrent’s consortium of five banks provide 49% of the investment, and Southern Power provides 51%. If so, that must mean Southern Company is finding solar power lucrative enough to invest in even when the resulting electricity does not go to Southern Company customers.

And Southern Company’s financing power apparently can make projects like this happen. Christian Roselund, PV Magazine, 30 November 3015, Work begins on 212 MW solar project in West Texas,

As a key component to all of this, Georgia’s Southern Company has acquired a 51% stake in the 157 MW-AC, 212 MW-DC project from developer Recurrent Energy and parent company Canadian Solar, which retain 49% ownership.

The acquisition of this equity stake may have been the final piece for the others to fall into place, including financing. A syndicate of five banks will supply the project with roughly $275 million in project-level construction debt, an LC facility and a back-leveraged term facility.

Recurrent Energy notes that while construction of a substation for the project began in September, securing financing was the signal to begin major works. “We close financing on a project and then move forward,” Recurrent Energy Spokesperson Cate Powers told pv magazine. “For Recurrent, that’s a pretty common cadence.”

That article also says Roserock is the biggest solar plant in Texas so far, and that 5¢/kWh is a record anywhere.

Plus this irony that Roserock is located “atop one of the largest oil fields in the United States.”

Solar power is now so cheap it’s being deployed on top of oil fields.

PS: Here’s RE Roserock LLC’s Texas PUC 150 MW Solar Power Generator registration.

-jsq

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