Apple takes a bite of solar as developers look for opportunity in African wind
The US solar market is set to boom some more, according to Bloomberg New Energy Finance, and last week the biggest company in the world gave it even more of a boost.
Apple, the world’s biggest publicly traded company by market capitalisation, said last week it is investing $848m in the purchase of clean energy from First Solar's California Flats Solar Project in Monterey County, California.
Apple will receive electricity from 130MW of the solar project under a 25-year power purchase agreement. This is “the largest agreement in the industry to provide clean energy to a commercial end-user”, according to a press release from First Solar. It also marks First Solar's foray into the non-utility arena.
For Apple, the motivation behind this move is not just corporate sustainability, but financial. With current incentives available to solar, the levelised cost of electricity for a plant in California could be in the range of low $70s/MWh, perhaps even lower, according to Bloomberg New Energy Finance. This cost likely undercuts the retail electricity price currently paid by Apple in its Bay Area facilities. The deal's reported $848m figure reflects the present value of future payments under the power purchase agreement.
The announcement is also more bullish news for the US solar market. Bloomberg New Energy Finance estimated in its H1 2015 North American PV Market Outlook, published on 16 January, that around 6.3GW of solar PV was built in the US in 2014, versus 4.6GW in 2013. It forecast then that around 8.4GW will be built in 2015.
In other US news last week, Enel told Bloomberg News it is putting the final touches on a yieldco that would hold its US renewable energy assets, making it the latest power-plant owner to opt for a structure that frees up capital.
The company will not seek to publicly list the yieldco, chief executive officer Francesco Starace told Bloomberg News. This move could lessen stockholder pressure to manage assets for the highest stock price or dividend return, and it frees the company from the expense and regulatory hurdles of a public offering, according to Bloomberg New Energy Finance. On the downside, Enel 's renewables arm, Enel Green Power, would forgo the lower cost of capital found on public exchanges. Unlisted yieldcos, on average, have target returns from 7%-11%, compared to listed yieldcos at 4%-6%.
Other energy producers like NRG Energy and SunEdison have created yieldcos to hold and operate power plants, offering investors dividends with long-term contracts and steady returns. "Yieldcos are especially attractive to renewable energy producers because they offer these usually small and fast growing companies an accessible source of cheap capital to accelerating development while potentially replacing tax equity as tax incentives expire," according to an 17 October Moody’s Investors Service report cited by Bloomberg News.
As Bloomberg New Energy Finance’s H2 2014 US Tax Equity Market Update says, tax equity is now a "supplier’s market". Developers are competing for investment from a small and perhaps shrinking pool of providers.
Across the Atlantic, Dublin-based clean energy developer Mainstream Renewable Power moved ahead with its plans to build wind farms in South Africa, raising $760m to build three projects totalling 360MW.
Loans will cover 75% of project costs, or about ZAR 6.75bn ($573m), and equity the remainder, Barry Lynch, Mainstream’s managing director of onshore procurement, construction and operations, told Bloomberg News. The Development Bank of South Africa will provide 30% to 40% and Barclays will lend the rest, he said.
Mainstream was awarded contracts for the wind farms by the Department of Energy under the Round 3 of its Renewable Energy Procurement Programme. The nation has so far procured about 3,900MW of capacity through the three competitive rounds of bids, with about $10bn invested.
Bloomberg New Energy Finance expects to see a minimum of 590MW of wind projects awarded in 1Q 2015, and 750MW commissioned throughout the year. There are concerns surrounding grid connection for larger wind projects, this Q1 2015 EMEA Wind Market Outlook notes, and the network will need strengthening. Bloomberg New Energy Finance expects Round 5 of the reverse auction programme to take place later this year, after which the future of the renewables programme becomes uncertain. Still, it expects to see approximately 4GW installed by 2020.
Finally, European carbon allowances jumped to EUR 7.73/t – their highest price in two years – last Friday. The surge came largely as a result of news about a market-fix plan introduced in European Parliament on Thursday. The proposal would start a mechanism to curb an oversupply in the European Union’s carbon market by the end of 2018, sooner than 2021 as proposed by the bloc’s regulator. Permit prices have continued to climb so far this week.