Another hedged solar project moves forward in Texas

In Texas’ red-hot solar market, you no longer need a power purchase agreement (PPA) to get financing for your project. In the Lone Star State a new business model of building solar plants to sell power on the wholesale market, with this sale underwritten by hedges, is emerging. What’s more important is that these projects are getting the cash needed to go forward. But as is often the case with business model developments, the new model of hedges is far from replacing the PPA. As evidence of this, yesterday Cubico Sustainable Investments announced that it has reached financial close on the 162 MW Wagyu solar project in Brazoria County on Texas’ Gulf Coast, which holds both a hedge and a PPA. Starbucks is buying a portion of the electricity generated by the plant under a 15-year corporate PPA, while BP is supplying a 12-year physical hedge. According to Cubico the PPA will cover 40% of the project’s output and the hedge 60%, meaning that most of the electricity from this project is not covered by a PPA.

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