ConEdison Development is an unregulated subsidiary of Consolidated Edison, the oldest and one of the largest US investor-owned energy companies. It is a leading owner of PV capacity nationwide and has emerged as a major player in the fast-growing Texas (ERCOT) utility-scale solar market, having acquired four projects, while working to develop a handful of others.
Noyes, who has several decades experience in the power sector, is responsible for the development and operation of the corporation’s renewable energy and customer energy efficiency and infrastructure projects.
Can you provide a brief historical overview of ConEdison Development’s involvement with solar power?
We’ve been involved with solar power for over 20 years since deregulation hit the marketplace. We really started to focus on renewable power in 2010 with a heavy focus on solar and a secondary focus on wind, and we are still involved with both. We’ve continued to grow the business year-on-year, primarily in North America. We are now the fifth largest owner and operator of solar in North America.
Why did ConEdison Development come to the Texas utility-scale market and what were the criteria for doing so?
A couple of things were very important to us. One, is we always want to have a state or utility-type entity who is a big believer in renewables and is supportive in terms of their strategy and long-term plan. CPS Energy clearly made that commitment a while back. That was an important element for us to come into Texas.
The second thing that is really good is the insolation, the solar resource, in Texas is fantastic. With the downturn of the oil and gas market, there was a large pool of skilled talent which made it helpful. That makes it easier to develop and build these plants.
Then, the final component is the ERCOT system with its open transmission. A lot of transmission allows for good economic access for renewable power whether it’s wind or solar.
The buy-in from CPS led your company to the Alamo projects?
That’s exactly correct.
There is no shortage of other solar projects in varying stages of development in ERCOT, some with interconnection agreements. Do you see ConEdison Development becoming involved here beyond the Alamo projects?
We have announced in the public arena an around 200MW project with Austin Energy. We have a handful of other projects that are not out in the public domain yet but we are working on in Texas. We will continue to grow our presence in that marketplace.
This 200MW project is in West Texas as well?
Yes.
Any possibility of developing projects in-house here in Texas?
All of the projects that are not OCI-CPS-related, we have developed ourselves.
These are all PV projects?
Yes.
How do you view the ERCOT large-scale solar market for future growth vis-à-vis natural gas? The price of power here is low but that doesn’t stop developers from showing great interest in the market. How do you view it in the next 2-3 years?
I think it is very promising in Texas due to innovation primarily driven by the early incentives – the ITC, what-not. The cost of equipment has been impacted and come down significantly on the solar side as well as the wind side. The efficiency is better. The BOP (balance of plant) equipment and the ability to install it with a skilled labor pool is much more efficient. All of those economics have driven to a point where you can compete in the marketplace like Texas.
What about the SunEdison bankruptcy and SunPower having announced some shorter-term issues tied to demand for its utility-scale solar power projects. Have you noticed an impact in Texas?
No. You always have in any business, in any industry, or marketplace, a player or two who miscalculates and/or wants to exit as the markets consolidate and mature. That to me is just a natural progression of someone who made a mistake. SunEdison made a mistake. They gambled on the yieldco market and it didn’t arrive, so they’re out. SunPower is getting chopped by competition. They are getting killed by SolarCity and others who are innovating better than they are. That’s just normal business.
How important is it for ConEdison Development that ERCOT is a liquid power market?
Any market that is well-run and the price signals are clear is a good thing. ERCOT has all that and it makes it very helpful when you are making investment decisions.
Are you seeing utility-scale solar growth beyond captive municipal markets such as Austin and San Antonio? We saw a pretty big contract recently signed by Luminant, which serves more of the deregulated ERCOT market. Do you see more of that in the future?
Yes. There is going to be quite a bit of that. There are a lot of folks out there with a heavy interest in Texas and elsewhere.
At the end of the day for large end-customers their second or third highest cost is energy. When they can go out and secure energy at a fixed-price long-term it just makes their business more stable because they can budget more effectively. Then they can drive their businesses in a more predictable manner. So, I would anticipate there will be a lot more of that.
How do you see large-scale solar competing with wind and gas going forward as ERCOT is not an RPS-driven market, but price-driven?
Against natural gas, no problem at all. Because if you think about the basic concept of gas price times heat rate, the solar component in Texas wins all day long even with low gas prices.
I think when you look at it versus wind, it’s tight. Wind is more cost-competitive than solar but the gap is closing significantly every quarter. The problem that wind has is that they need to build where the wind resource is out in far, remote sections of Texas.
Then they have congestion problems bringing it down to the marketplace.
Solar is everywhere. You could do it in downtown SA, a mile from there or outside and bring it in. I think from that perspective there is a lot more value for solar and you can place it in areas that will help ERCOT from a reliability standpoint. Seen today, wind wins but as time moves on, solar is going to be more of a tool for ERCOT and the state to utilise to plan out their resources more efficiently.
The solar bell curve better matches the demand curve better than wind here …
Precisely. That’s one of the key elements on reliability that I was talking about.
How do you see the C&I market here in Texas for utility-scale solar?
It hasn’t really started yet but it will. Typically [it] lags the utility-scale by about three years, or has in other states. It will probably do the same in Texas. But I would expect that marketplace would pick up quite a bit.
Has your company been working on new products – off-take contracts of shorter duration? It’s been an issue here with hedge agreements for wind.
We’ve seen a lot of folks in Texas move to a 10-year PPA. I’m not a big fan of that but I understand why some people do it. Those products are available out there. We’ll probably not do a lot of that. It is their business model and they are kind of willing to finance with banks this 10-year window because it lines up with a lot of what banks do. It’s a different investment profile than us.
You’re pretty confident you can do CPS-style longer-term utility-scale PPAs, perhaps with other buyers going forward in Texas?
Yes, because it’s just a question of economics. At the end of the day, when you have the shorter PPA, the customer is going to pay more because they are getting that value up front. If you know you are committed to the business in the long-term, you are in a much better position if you write a 20 or 25 year PPA to drive toward a lower price and have stable certainty around your energy prices.
Frankly, most of our customers understand that. Let’s just say that gas is $3 MMBTU. At $3 the probability of it going down significantly is pretty low. The probability of it going higher is extremely high.
If you can lock in at today’s gas prices which is how we mark the PPAs basically, you can lock-in statistically the benefit. Then if gas prices go up, obviously solar will go up at the same time just because it can and you don’t have that risk associated with your long-term energy needs.
Companies are also buying renewables for other reasons …
Yes, except in Texas there is no RPS. There are really no RECs. In reality, their only obligation is to buy for energy, not the renewable side of it. They may be doing some of it for branding and what-not, but there is no economic reason to be doing it at this point.
Rooftop solar. Is that something that interests your company here?
We do both. We think both of those markets as well as battery storage at the C&I and utility-scale levels makes perfect sense in the long-run for us and consumers at the end of the day.
Even though there is no NEM here?
Again, it gets back to the concept that the price of equipment has come down just a tremendous amount and so it’s cost-effective. In the Texas market, labor and land is less expensive and the solar resource is really high.
Have you been considering any involvement with wind here?
We’ve looked at it but haven’t done anything with it yet. We’re not opposed to it. The problem with wind in Texas is that the wind is a long way away from the load centres. A lot of people are using those transmission lines and it’s created a bit of a congestion problem. We’re a bit concerned about that. That’s why in Texas we focus on solar.
