Renewable power investing is ramping up in Texas, and not only because of increased demand for sparked by hydraulic fracking. The wind-down of coal-fired generation plants and new renewable projects catering to specific companies including Facebook and Target. Big tech’s hunger for new data centers and other private facilities, rather than sales to the grid to meet state electricity demand, are driving this renewables push.
Major Solar Projects
In May Longroad Energy announced that Facebook would invest in the Boston-based power operator’s $416 million Prospero Solar project in West Texas. The Prospero project, scheduled to be completed next year, will have capacity of 379 MW, and cover about seven square miles, or five times the size of New York City’s Central Park. Highlighting the convergence of renewable energy and the fossil fuel industry, Royal Dutch Shell Plc will be the buyer of the electricity.
Last week, Engie, the French power provider, announced it had entered into a 15-year power purchase agreement (ppa) with Target for 89 MW of capacity from its Sand Fork Solar Project in Texas. Target’s purchase will be roughly equivalent to the energy required power 250,000 U.S. homes for more than a month, slightly less than half of the Sand Fork Solar Project’s total capacity of 200 MW. Engie is looking to build over 2.5 GW of wind and solar capacities over the next 3 years in the U.S. and Canada.
In addition, a handful of Fortune 500 companies, including Applied Materials Inc., Campbell Soup Co. and FedEx Corp., have gone solar in Texas.
Along with demand for new data centers as new projects enter construction, demand for services like maintenance and transmission will likely increase, allowing private capital to finance such services.
Coal
Gradual phasing out of coal is creating additional opportunities for alternative energy investors.
In 2018, three coal plants were shut down, removing more than 4,000 MW (enough to provide power for at least 800,000 Texas homes) of generating power. This power needs to be replaced, likely with renewable energy projects.
Texas generates more electricity than any other state in the US, with 33.5 million MWH, followed by Pennsylvania (18.3 million MWH). Texas is the 6th largest coal producer, right behind Illinois and Kentucky, with 36.4 metric tons of coal per year. If coal is going to take time to be phased out, carbon capture and storage (CCS) technologies will need to be applied to reduce the carbon footprint of these plants, allowing VC-backed technology companies to develop products and services to address this specific need.
Since Texas has several mature oil fields that need to be extracted via Enhanced Oil Recovery (EOR) techniques, CCS projects are better positioned to provide CO2 required to operate these fields. In the U.S., this has been the case with the Terrell Natural Gas processing facility in McCamey, Texas, that captures, stores and transports CO2 to oilfields in the Permian Basin.
The closing of the coal-fired power plants has trimmed the projected power reserve margin to 7.4%, an already low figure at just over half of Electric Reliability Council of Texas ERCOT’s reserve margin goal of 13.7%. The margin refers to additional power available to meet unusually high demand or to fill in when generators unexpectedly break down, which could lead to price spikes or blackouts.
New wind generators may also mean that so-called “peaker plants” may never be fired up. These plants stay dormant except during the summer months when demand soars, supplies dwindle and prices spike. The added wind-based supplies have moderated summer price spikes.
