Different forms of innovative financing are driving new solar and wind energy development in the United States, just as the Trump administration moves to unwind President Barack Obama’s signature Clean Power Plan and prop up a tenuous campaign promise to restore coal industry jobs.
““Every major infrastructure project, whether a bridge, housing development, or wind project, requires as much financial engineering as it does architectural engineering with tools and raw materials,” said Microsoft Energy Strategy Director Brian Janous, the buyer for one recent project.
In North Carolina this week, in what Renewable Energy World touts as “the largest renewable energy project built in the U.S. through an alliance of diverse buyers”, Dominion Resources brought the 60-megawatt Summit Farms solar project online. The project will supply emission-free power to three investors: the Massachusetts Institute of Technology, Boston Medical Center, and Post Office Square Redevelopment Corporation. Each of the partners entered into its own power purchase agreement (PPA) for a share of the solar farm’s output; none of them had to put up a penny in capital investment.
“The buyers aggregated their demand and negotiated as a group to capture large-scale cost economics,” REWorld notes. “This aggregated approach to purchasing renewables demonstrates that a broad range of organizations can capture economies of scale typically reserved for utilities, or the likes of Google or Amazon. Other businesses and institutions interested in fundamentally reducing electricity-related costs, risks, and greenhouse gas emissions should consider replicating this innovative approach to accessing large-scale renewable energy (LSRE).”
In Kansas, meanwhile, infrastructure and project finance magazine IJGlobal recently named the 178-MW Bloom wind farm its North American Wind Deal of the Year, after reviewing the innovative financial structure under which its output will be sold to Microsoft. [Editor’s note: So we now have a named award for North American Wind Deal of the Year!] The 10-year agreement sets a fixed annual price that insulates buyers from the hourly ups and downs of wind resources and power prices, the Institute for Energy Economics and Financial Analysis (IEEFA) reports.
“Microsoft in November became the first buyer to participate in the structure and is acquiring the Bloom project’s environmental attributes,” IEEFA notes, citing a news release from project partners Allianz Risk Transfer and Alberta-based Capital Power. “The combined output from Bloom and a Wyoming wind farm will produce enough energy on an annual basis to cover the annual energy used at Microsoft’s data center in Cheyenne.”
Microsoft’s Janous said the project “represents the first time the reinsurance market was used to transfer risk away from a project—in this case the risk of uncertain production output when the wind doesn’t blow—benefiting both the project owner (energy producer) and the off-taker (energy buyer).”