Urban Grid announces NextEnergy Capital’s acquisition of approximately 46MWp of solar projects in Virginia

RICHMOND, Va.April 25, 2019 /PRNewswire/ — Urban Grid, a leading developer of solar projects throughout the United States, is pleased to announce that NextEnergy Capital through their fund NextPower III, has acquired two of our solar development projects, totaling approximately 46MWp/34MWac, in Henrico County and Westmoreland County, VA.

The two solar projects, Briel Farm Solar (28MWp/20MWac) and Gardy’s Mill Solar (18MWp/14MWac), will cover approximately 300 acres and generate electricity equivalent to the consumption of 9,785 homes.

These two projects represent NextEnergy Capital’s first utility-scale solar venture in the United States for their new fund, NextPower III.

The estimated $40m construction cost of the two projects will generate over 120 jobs. Construction will commence immediately with the projects expected to reach commercial operation by March 2020. The solar projects will provide direct and indirect economic benefits to the Commonwealth of Virginia of approximately $21m and will offset approximately 123,706,737 pounds of CO2 annually.

Frank DePew, President of Urban Grid commented “Urban Grid is excited to announce the acquisitions of these two projects by NextEnergy. Our team members successfully partnered previously with NextEnergy on several solar projects in the UK and we are pleased to continue that relationship with the sale of Briel Farm Solar and Gardy’s Mill Solar, facilitating NextEnergy’s expansion into the US market. Urban Grid looks forward to continuing to bring exceptional development projects and economic benefits to the Commonwealth of Virginia. We are grateful to the many individuals that made these projects possible, especially those at Henrico County and Westmoreland County for their support and cooperation throughout the development process.”

Michael Bonte-Friedheim, CEO and Founding Partner of NextEnergy Capital highlighted “We are very pleased to announce NextPower III’s first investments in the US solar market, where we expect to grow significantly in short order.  We are also looking forward to strengthening the partnership with Urban Grid and developing our relationships within the local communities and institutions.  Our track record of fostering mutually beneficial relationships in the communities in which we operate is something we are particularly proud of.”

About Urban Grid
Urban Grid is a leading developer of utility-scale solar power plants. Founded in Richmond, Virginia, in 2011, with offices in VirginiaWashington, DC, and Maryland, Urban Grid has completed the development of approximately 646 MWp of solar projects and currently has more than 5,600 MWp of solar projects under development. Our team has a proven track record of delivering solar energy solutions for corporate, utility, and municipal clients to meet their sustainability and renewable energy goals.  www.urbangridco.com

About NextEnergy Capital
NextEnergy Capital (“NEC”) Group is one of the leading international investment and asset managers focused on the solar sector. Founded in 2007, NEC has over 140 employees across five offices, including LondonMilanHyderabadLuxembourg and Guernsey. Since inception it has acquired over 150 solar assets and NextEnergy Capital Limited currently manages c.$1.5 billion worth of solar investments.

NextPower III is a private equity fund established to invest in the international solar sector, specifically to fund the construction and long-term ownership of solar power plants. NextPower III’s target markets comprise mainly OECD and OECD Key Partner countries. It has initial commitments of c.US$160m, secured at its first close in November 2018, and a target size of US$750m. In the UK, the NextEnergy Solar Fund (NESF) is listed on the London Stock Exchange and is the largest listed solar infrastructure company in Europe.  It has invested over £894 million into operating solar assets, amassing a portfolio of 87 operational sites, with a total capacity of 691MW. Of the 87 sites, 7 are in Italy and there are 3 portfolios of UK rooftop assets.’

What Is A Sleeved PPA?

As a large organization, a Power Purchase Agreement (PPA) is often the most accessible and effective way for an organization to procure large amounts of renewable energy. The two most common types of PPAs are sleeved PPAs, also called a direct PPA or retail PPA, and Virtual Power Purchase Agreements (VPPAs). According to the Business Renewables Center, about 20% of large-scale corporate renewable energy deals are sleeved PPAs. 

What Is A Sleeved PPA?

In a sleeved PPA, an intermediary utility company handles the transfer of money and energy to and from a renewable energy (RE) project on behalf of the buyer. The utility takes the energy directly from the RE project and “sleeves” it to the buyer at its point of intake, for a fee. If the purchased renewable energy isn’t enough to meet the buyer’s energy needs, the utility is also responsible for supplying the additional power required. 

A Sleeved (Direct) vs. Virtual PPA

If you’ve weighed the risks and benefits of a VPPA for your renewables purchase and are uncomfortable with the level of risk, a sleeved PPA may be a good option to explore. Unlike a VPPA, in a sleeved PPA:

  • The buyer does not need to be intimately familiar with wholesale power market dynamics; and 
  • The buyer is not subject to wholesale power market price fluctuations because the utility bears the market risk

Additionally, a sleeved PPA is the best renewables purchase option available when:

  • The buyer is not set up to be able to purchase balancing power — power that’s needed when renewable energy isn’t available due to weather conditions or time of day

Some very large and sophisticated organizations have set up mini utility models to avoid having to purchase balancing power, but this requires a large investment of both capital and time to gain expertise.

  • The buyer is in a regulated electricity market that does not have a Regional Transmission Organization (RTO) or Independent System Operator (ISO) — like the Southeastern U.S.
  • The buyer is in a deregulated energy market, like Maryland or Pennsylvania,  where the sleeved PPA mirrors an electricity supply contract.

Sleeved PPAs in Regulated vs. Deregulated Markets

Given their nature, sleeved PPAs are much more common in deregulated markets, but they can also exist in regulated wholesale power markets as well. 

How Sleeved PPAs Work in Deregulated Markets

If you operate in a deregulated electricity market, a sleeved PPA — also referred to as a Direct PPA or Retail PPA — is a great tool for purchasing renewable energy to meet corporate sustainability goals. They’re particularly advantageous for organizations with large, fragmented loads or limited onsite opportunities. By sleeving your PPA with a utility supplier, you gain key benefits while reducing your organization’s exposure to market risks: 

  1. The utility assumes the market (price), volume and shaping, and basis  risks
  2. Reliability of power supply – power when the renewable project is not producing
  3. Long term, fixed rate for power
  4. Control over power-pricing relationship vs. paying a tariff set by the utility
  5. Easier verification that energy is procured from a particular renewable source
  6. No upfront costs or capital expenditure requirements
  7. Option to claim additionality — indicating that your organization is driving the construction of new RE projects

Sleeved PPAs generally have few drawbacks, with the most common ones being:

  • The contract involves three parties — Energy Buyer, Utility, RE Project
  • The buyer must pay the utility a fee for management, sometimes called a ‘sleeving fee’

Sleeved PPAs in Regulated Markets

The most common way a buyer can enter into a sleeved PPA within a regulated power market is through a Green Tariff. With a Green Energy Tariff, the utility supplies the customer with up to 100% renewable power from projects controlled by the utility. Green Tariffs come in many forms, so take time to look at a Green Energy Tariff comparison, to familiarize yourself with the differences between each.

The most common type of Green Energy Tariff explained

The most common type of Green Tariff in the utility scale renewables market is the type where the utility passes the terms and structure of a PPA with a RE project through to a customer. In most cases, they avoid shifting costs and risks to non-participating customers. And typically, the customer can purchase Renewable Energy Credits (RECs) and other environmental attributes from the contracted RE projects. Unlike deregulated markets, when entering into a sleeved PPA through a Green Energy Tariff, the buyer gives up much more control to the utility.

Explore Your PPA Sleeving Options

If your company is looking for a risk-averse solution to meeting its sustainability goals, a direct PPA is worth exploring. Learn more about how you can meet your energy needs while simultaneously reducing your collective carbon footprint. Contact Urban Grid Solar today.