2020 may be remembered as the year the energy system changed forever. Alberta-based Greengate Power has reached an agreement with investors to fund a large-scale solar power project without any form of subsidy or long-term power contract. This is a first in Canada, and marks an important historical transition point as solar power achieves new levels of economic competitiveness.
"We are proud to be part of creating subsidy-free, market-based solutions that significantly improve Alberta’s environmental performance,” said Dan Balaban, President and CEO of Greengate.
On February 3, Greengate Power and Copenhagen Infrastructure Partners jointly announced they had signed an agreement to finance the C$500 million construction of the Travers Solar Project in Vulcan County, Alberta. The announcement represents a breakthrough in three respects:
1. It will be the largest solar power installation in Canada and one of the largest in North America.
2. It will be the first example in Canada of large-scale solar power financed without government subsidies, guarantees or contracts, purely on the basis of its anticipated market revenue from the sale of energy and environmental attributes.
3. It is concrete evidence that solar power has reached price competitiveness in parts of Canada.
The Travers Solar Power Project signifies a breakthrough in low cost renewable energy suitable for northern climates.
The Travers initiative is not a test case or a demonstration project. With a total generating capacity of 400 MWac and an estimated capital cost of approximately C$500 million, Travers Solar will be large enough to supply electricity for more than 100,000 Alberta homes during its thirty or more years of operation. It has already secured all required regulatory approvals including an interconnection arrangement with the provincial grid operator.
This development suggests that long-term change has taken hold, fundamentally altering the way investors will view future power system options. In many cases is it now possible that the least expensive source of new bulk electric power will be non-emitting renewable energy, even in northerly locations with ready access to fossil fuels. Futurists and energy planners have long imagined a “Tipping Point” at which widely available energy from the sun would be less expensive than the average cost of power from the grid. It appears that day has arrived, at least in some parts of Canada.
The project financing is based on a combination of energy sales and environmental attribute revenues. Under Alberta’s TIER program, certain environmental attributes can be used by large emitters for compliance. Mr. Balaban credits the Alberta government “for a well implemented program that is enabling subsidy-free investment in renewables.”
Despite its significance, this development does not imply total change. Even with its increasingly attractive pricing, solar energy without storage cannot replace all sources of electric power on a grid. Significant portions of a grid’s electric power supply must be available on demand and in response to real time grid requirements. Some developers of solar energy are building generating facilities with integrated storage capabilities to address this problem, an enhancement that raises the cost of the power and limits the places in which such installations are financially attractive. However, the cost of electricity storage is also declining and may be less of a limitation over time.
In the near term, bulk solar power without storage can be expected to play a role in what’s called economy baseload service, essentially providing energy on an as-available basis, when it’s economic to do so. Typically, a large scale modern grid can accept this kind of intermittent energy for 15 to 30% of its supply before running into operational limits. In the longer term, off-peak generation from solar installations can be paired with batteries and hydrogen technologies to help match the output of the solar farm with the needs of the grid and extend its applicability.
If costs for solar generated power continue to decline relative to other options, it’s a safe bet that the electric grid will get cleaner and cheaper, likely at a pace driven by the underlying economics. At the same time, the declining costs of renewable energy may cause more sectors of the economy to switch to electricity, reducing the use of carbon-based fuels in transportation, housing and industry. This kind of clean technology appears poised to reshape the way we make and use energy, and could help to reverse trends developed over centuries that have caused increasing emissions of greenhouse gases and other pollutants.
It is noteworthy that a northern country like Canada is the location of one of the first large scale solar farms to be financed on market revenues alone. Although Alberta benefits from high levels of sunshine and a well-developed electric energy market, there are certainly other locations with high levels of sunshine and attractive energy markets.
Travers Solar will not likely be the only power project of its type in Canada. In fact, considering its reliance on energy market fundamentals, it has cut a path that may soon be followed by many more.
Greengate Power is an industry leading, privately held renewable energy company based in Calgary, Alberta, Canada. Since 2007, Greengate has successfully developed close to 1,000 MW of operating or near-construction renewable energy projects in Canada, including the country’s largest wind and solar energy projects. These projects represent over C$1.5 billion of investment and are expected to provide a clean source of power to more than 350,000 homes.
Copenhagen Infrastructure Partners P/S (CIP) is a fund management company focused on energy infrastructure including offshore wind, onshore wind, solar PV, biomass and energy-from-waste, transmission and distribution, and other energy assets like reserve capacity and storage. CIP has approximately 110 employees and offices in Copenhagen, New York, Tokyo, Utrecht, and London. It is a multinational team with a broad range of competencies within corporate finance, merger & acquisitions, engineering, construction, project development and project management. CIP was established in 2012 and has invested in utility scale renewable assets across North America, Europe, and Asia Pacific.
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Note: This posting contains conjecture and opinion and should not be relied upon as definitive or used as a guide for any kind of investment decision. It contains the views of the author and may or may not reflect the views of APPrO or any APPrO members.