With the $2.4 billion acquisition of First Wind, SunEdison (NYSE: SUNE) is about to become the world’s top renewable energy developer, and could change how utilities buy clean energy.
Investors in SunEdison’s YieldCo, TerraForm Power (Nasdaq:TERP), will receive dividends from both solar and wind projects. Not only does First Wind develop wind projects, but recently it’s entered utility-scale solar.
"Access to low-cost capital is a huge strategic advantage today. First Wind needs access to this capital, and this transaction shows that SunEdison has more credibility on YieldCos and low-cost capital than anyone," Jigar Shah, who founded SunEdison, told Greentech Media.
SunEdison gets 8 gigawatts of projects in First Wind’s pipeline in addition to 521 megawatts of operating wind and solar plants. And it gets a strong foothold in the wind industry, diversifying its YieldCo beyond solar. Future investments may include hybrid power systems and hydroelectric, the company says.
The purchase more than doubles SunEdison’s market, giving it deeper access internationally, and synergies on the development and financing sides. It also provides protection should US federal solar incentives be allowed to expire in 2016.
Game-Changing For Renewable Energy
Most important, however, is the potential to dramatically grow the market share for renewable energy. As Herman Trabish points out in UtilityDive, for the first time a developer will be able to offer clean energy 24-7 to utilities.
"We should sell a renewable product, 8000 hours per year, 24 hours per day, that combines hydro and wind and solar and whatever," Paul Gaynor, CEO of First Wind told UtilityDive. "That would create real breakthroughs on displacing gas and coal and hitting those big market share numbers."
Instead of marketing a wind or solar contract to utilities, as is done today, they would buy "1 gigawatt (GW) of clean energy." One hour it might come from locally produced wind and another half wind/ half hydro, for example. That would bring the delivered cost of energy way down, while guaranteeing reliable power and stable costs without the use of fossil fuels, he says.
In this example, a 1 GW power purchase agreement would save Massachusetts ratepayers a $1 billion a year, Gaynor told UtilityDive. "When you can go to a politician or state utility commissioner and offer a big renewable project that could save consumers a billion dollars per year, they stop and listen."
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SunEdison invented the solar leasing model that’s used so widely today. Among its many customers are Google, Staples, New York City, and it built India’s largest solar project to date.
Read our background article on YieldCos: YieldCo Makes Largest Wind Farm in US Available to Investors.
Other YieldCos that have recently gone public are Abengoa Yield (NASDAQ:ABY), NextEra Energy Partners (NYSE: NEP), and NRG Energy’s NRG Yield.
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