This year, Enel Green Power North America (EGPNA) began constructing a pair of Texas solar and wind projects that are poised to produce nearly 1 GW of renewable energy once they’re brought online. In addition to these facilities – the 450 MW High Lonesome wind project and 497 MW Roadrunner solar project – the company manages more than 100 renewable energy plants in the U.S. and Canada: 4,516 MW of wind, 230.6 MW of solar, 72 MW of geothermal and 299 MW of hydro.
Moreover, at the end of March, EGPNA closed an agreement to acquire developer Tradewind Energy and its 13 GW U.S. development pipeline of wind, solar and storage projects – 6 GW of which will be sold to the Macquarie Group.
North American Windpower recently interviewed EGPNA to learn more about the company’s plans amidst looming tax credit sunsets, new financing mechanisms, the rising trend of corporate purchases and more.
Q: What currently makes Texas in particular an attractive market for you?
A. We evaluate a number of different factors when deciding where to invest in North America. Of course, resource availability will play a large role in that decision, as does market liquidity.
According to a recent BCSE report, total renewable energy capacity has doubled within the past decade, with wind and solar representing nearly all new additions. The wind and the sun are some of the most abundant sources of energy in the world – and Texas has plenty of both. This natural advantage, along with the call for increased energy storage, positions the state to lead renewable energy procurement over fossil fuel generation.
Additionally, what makes ERCOT an interesting market is that there is tremendous demand for renewable energy from both corporate customers and utilities that allows for creative off-take structures through a variety of power purchase agreements (PPAs).
Enel first entered Texas in 2008 with the 63 MW Snyder wind farm, located in Scurry County. At the time, this project used the tallest utility-scale wind turbines in the U.S. Earlier this year, we welcomed the opportunity to go back to Texas to diversify our market presence with the High Lonesome wind farm, and now, we are excited to begin construction on our Roadrunner solar farm.
Together, High Lonesome, Roadrunner and Snyder represent about 1 GW of renewables in Texas – enough power to light 100 million LED bulbs.
Q: Is the impending sunset of the production tax credit (PTC) and investment tax credit (ITC) affecting your U.S. development decisions?
A. The PTC and ITC have been successful policies for wind and solar, respectively. As these credits phase out, the wind and solar industries have to be – and will be – ready to stand up and compete and deliver value to customers and the grid without federal tax incentives.
Even as the PTC phases out, we expect more corporations to shift to renewable energy sources because of an increased commitment to sustainability and the price competitiveness of renewables.
While wind power is not expected to return to rock-bottom pricing, steady cost reductions stemming from factors including technology improvements, the adoption of bigger turbines with larger blades, and a sweeping supply-chain reorganization will keep wind competitive on a pure-cost basis in much of the U.S. “wind belt” region during and after the PTC phase-out. Once the phase-out is complete in 2024, wind will still come in below new combined-cycle natural gas facilities on a levelized cost of energy basis in 20 states, with this figure expected to grow to 28 states by 2027.
Q: What are your U.S. development plans in the short and long term?
A. A recent report from BloombergNEF found that last year, companies and government agencies signed contracts to buy 13.4 GW of clean power, shattering the prior record of 6.1 GW that was set in 2017, proving corporate hunger for clean power is stronger than ever. Enel Green Power is proud to be a part of the robust pipeline of new wind and solar farms currently under construction or in advanced development, paving the way for yet another strong year for renewable energy procurement.
So far in 2019, we have begun construction on the High Lonesome wind project and Roadrunner solar project in Texas. Moving forward, we expect to bring online around 1 GW in new renewable energy projects in each of the next three years.
Q: How many corporate PPAs does the company have in place in the U.S., and why do you feel corporate renewables purchasing has become so popular in recent years?
A. In the U.S., Enel Green Power has secured nine major corporate customer agreements, including with Adobe, Anheuser-Busch, Bloomberg, Facebook, General Motors, Google, Kohler and T-Mobile.
Corporate renewables purchasing has increased in popularity over recent years because companies are searching for energy alternatives that meet their sustainability goals, are more budget-friendly and provide more autonomy in their energy consumption.
The American Wind Energy Association (AWEA) recently released a report sharing that Fortune 500 companies, as well as cities and universities, purchased a record amount of wind power in 2018. And data from the Business Renewables Center recently confirmed that wind provides more energy to corporate brands than any other renewable source.
In February, Anheuser-Busch aired a 45-second commercial during Super Bowl LIII promoting that Budweiser is now brewed with 100% renewable electricity. At the same time, the company also announced it would be donating six days of renewable energy attributes to Atlanta’s Super Bowl Host Committee to power the equivalent of the city’s energy consumption during the largest sporting event of the year. One-hundred percent of this clean, renewable electricity came from Enel Green Power’s Thunder Ranch wind farm in Oklahoma.
Q: What are the benefits of the proxy revenue swap, as used for the High Lonesome wind farm, and do you plan to use this strategy for more projects?
A. Proxy revenue swaps (PRS) are a new revenue hedging mechanism that we potentially will be using to complement our existing PPA offerings. The PRS are designed to produce stable revenues for a project regardless of power price fluctuations and weather-driven intermittency. This is done through fixed payments based on an assumed proxy generation, which are adjusted in line with actual generation.
The PRS represents a relatively new financial hedging instrument in the U.S. wind and solar market, allowing project developers to secure stable revenues and mitigate the impact of power-price and weather-related fluctuations. A renewable energy project can choose where to build and how to operate. However, it has no control over how much resource (wind speed or sunshine) shows up in a given year, what average power prices will be or how well hourly production volumes will correlate with energy prices.
A PRS contract provides renewable energy projects with protection against exposure to these uncontrollable risks. Under a PRS, a renewable energy project exchanges its variable revenue stream for a fixed payment – providing an unprecedented level of cash flow certainty.
The PRS is an effective tool to manage weather and cash flow uncertainty and is a vehicle to facilitate “additionality” (new renewable capacity connected to the grid).
Q: What hurdles do you feel are still facing the U.S. wind and solar markets?
A. As far as challenges are concerned, we believe that the path for growth is set for renewables, driven by competitiveness and customer demand. The industry has momentum behind it, and we will continue to see more renewable capacity brought online next year and for many years to come.
