Hannon Armstrong and Clearway Energy Inc. are jointly investing about $950 million in a nearly 2 gigawatt portfolio of existing and new wind, solar and energy storage projects, capping off a year of record-setting U.S. renewables growth with an eye on even greater growth to come.
Hannon Armstrong’s shared investment with Clearway Energy Inc., the publicly traded affiliate of Clearway Energy Group, will give the climate-focused infrastructure investor a preferred equity interest in a seven-project portfolio including 874 megawatts of onshore wind, 192 MW of utility-scale solar, and 557 MW of utility-scale solar combined with 395 MW of co-located storage.
The total finance value of the portfolio is about $2.8 billion, including tax equity and permanent equity interest in the projects, Clearway Energy Group CEO Craig Cornelius said in an interview. Two of the projects are already built: the 419 MW Mesquite Star wind project in Texas and the 192 MW Rosamond Central solar project in California.
Two others — the 345 MW Mesquite Sky wind project in Texas and the 110 MW Black Rock wind project in West Virginia — are breaking ground this month and are expected to be operational by the end of 2021.
The three remaining projects — the Daggett Solar project in California with 482 MW of solar and 320 MW of co-located storage, and the 36 MW Waiawa solar project and the Mililani 39 MW solar project with 75 MW of co-located storage, both in Oahu, Hawaii — are set to start construction in mid-2021 and enter operation in 2022.
It’s a mixed portfolio with “a lot of natural diversification within it,” Cornelius said. “You’ve got wind resources and solar resources spanning literally thousands of miles of longitude. You’ve got revenue projects and contract cash flows that balance themselves out over time, with different combinations of contracted revenue periods and open merchant periods.”
About 90 percent of the projects’ power is contracted to counterparties in a portfolio with a greater than 14-year blended average contract length. Offtakers include utilities such as Hawaiian Electric and AEP and California community choice aggregators including East Bay Community Energy and Clean Power Alliance, as well as corporate offtakers such as Toyota, EcoLab, Intuit and Lowe’s, he said.
Renewable energy investing in a maturing U.S. market
Clearway Energy Group, the company formed by Global Infrastructure Partners’ 2018 acquisitions of NRG’s renewable energy business and SunPower’s utility-scale solar project pipeline, is one of the largest clean energy developers in the U.S.. It has about $13 billion in assets ranging from utility-scale renewables to distributed solar and battery projects, and a project pipeline of 9 GW through 2023.
U.S. utility-scale solar, wind and energy storage installations are set to break records in 2020, with continually falling costs making renewables cheaper than fossil fuel-based generation across many markets. Clearway competes with major renewable energy developers such as NextEra Energy Resources, Invenergy, Engie, EDF, Enel and Iberdrola.
The scope and variety of projects in the newly announced investment portfolio “is a sign of the maturity of the industry,” Hannon Armstrong CEO Jeff Eckel said in an interview. “You can make repeat investments with different counterparties and continue to gain efficiencies each time.”
The publicly traded climate-focused investor has more than $6 billion in managed assets as of September. Its utility-scale renewable investments include a similar 50-50 partnership with Engie North America in July, directing more than $500 million to a 2.3 GW portfolio of utility-scale wind and solar projects, as well as about $300 million in onshore wind projects.
It has also invested more than $50 million in distributed solar, about $40 million in community solar, and about $30 million in residential solar leases; $85 million in a Marine Corps microgrid project, more than $100 million in Engie’s 50-year energy services contract with the University of Iowa, and roughly $80 million in energy efficiency projects.
As renewables grow to make up a larger and larger portion of total electricity generation, the mix of resources needed to integrate them into the grid are changing, Cornelius noted. The battery capacity included in its Daggett and Mililani projects “is configured with the goal of taking solar output in the middle of the day and have it be dispatched at a different time of day” — the same imperative that’s driving most of the new solar power in Hawaii and California to include energy storage.
The incoming Biden-Harris administration has made clean energy a centerpiece of its climate change mitigation strategy, with plans for executive actions to boost federal clean energy purchasing and renewables development on public lands, and a $2 trillion climate action plan that includes decarbonizing the U.S. electricity sector by 2035.
Eckel also highlighted the potential for federal policies that could expand the value of renewables. Hannon Armstrong uses a “CarbonCount” score to assess the impact of its investments, measuring the metric tons of reduction of carbon dioxide equivalents per $1,000 invested.
The projects will Clearway rank a CarbonCount score of 1.06, which is “an attractive number — and if there were a price on carbon, it would have much more meaning.”
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