Duke buys a 200 MW merchant solar project in Texas

The 200 MW Holstein project holds a 12-year hedge agreement with a subsidiary of Goldman Sachs. As one of the first U.S. merchant projects seen by pv magazine, it points to larger moves in the solar market. There have long been a few key requirements for building a utility-scale solar project. You need interconnection approval from the utility or grid operator, you need permitting approval and you need a power purchase agreement (PPA) to sell your electricity. Or do you need that last one? Yesterday the news broke that Duke Energy Renewables has boughtthe largest solar project in its fleet to date, the 200 MW Holstein project in west-central Texas which 8minute Solar Energy has developed. The project does not hold a PPA, but instead a 12-year hedge with a subsidiary of Goldman Sachs for “much of the energy”. Under hedge agreements, a bank agrees to serve as the buyer of last resort in the event that the electricity can’t be sold at a certain price, acting as a sort of price insurance. These agreements are important in providing investment security for projects like Holstein which sell directly into the wholesale market. In this case, CIT Group is leading a consortium of banks which are providing construction financing, a letter of credit, and a term loan.