The Alabama Municipal Electric Authority (AMEA) has signed a 20-year power purchase agreement with Lightsource BP (a British Petroleum partnership) for the output of a 100-MW solar power project.
In addition to developing the solar project, Lightsource BP is financing it and will own and operate the facility in Montgomery County, Alabama, which is due online in 2022. The 350,000 solar panels of the project will cover 800 acres at a site about 15 miles from Montgomery, the state capital.
Lightsource BP and the other investors plan to invest about $125 million in the project.
AMEA plans to use the output of the solar plant to supply clean, locally sourced energy to its 11 member utilities. “AMEA is excited to bring cost-effective, locally sourced solar energy to our member communities,” said Fred Clark, president and CEO of AMEA.
The facility will also contribute over $5 million in property tax revenues to county schools over its projected 35-year life span. “This project will provide considerable support to Montgomery County schools, dollars the school systems otherwise would not receive,” Elton Dean, Montgomery County commission chair, said in a statement. “This is a major economic development project for the rural part of our county and will bring in a strong corporate partner in Lightsource BP,” he said.
In addition to taking all the energy output from the solar plant, AMEA is also getting the renewable energy credits (RECs). Frequently companies looking to relocate are also looking to meet their own renewable energy targets, Clark said. So, if a company were looking to build up their renewable energy portfolio, this could be a good recruitment tool. “The value of industrial recruitment with this endeavor was invaluable,” Clark said.
While the Montgomery project will be AMEA’s largest solar plant to date, it is not its first. AMEA’s board dedicated $1 million for solar research projects, and the electric authority built its first solar research plant adjacent to AMEA’s headquarters building in Montgomery in 2016.
AMEA had been studying solar power for 5 years, but in 2016 “the pricing was getting better,” Clark said. The response from AMEA’s members was so positive that the utility began building 50-kW solar research facilities in the communities of each of its 11 members. So, eight solar facilities have been built, and the final three are slated to come online by year end.
The decision to take the next step to a utility scale solar project was driven by several factors, Clark said. While hydrofracking has often made natural gas-fired generation the resource of choice, “we believe we have to look at the diversity of our menu of resources,” he said. “We saw solar as a hedge against the volatility of natural gas prices.” In addition, AMEA saw a significant drop in solar panel prices in the five years since they first started looking at solar.
“We didn’t choose solar power because it is renewable,” Clark said. “The primary rationale is that it’s a hedge and diversity play against natural gas and coal resources.” In addition, “There is a window here,” Clark said, referring to the investment tax credit (ITC) that contributes to the low cost of solar power from a development perspective, but is scheduled to drop to 10% of capital invested in 2022, from 30% today. “There was a window, and we saw we could capture this right now.”
The solar power purchase agreement with Lightsource BP lets AMEA lock in a competitive energy price for 20 years. The 100 MW from the solar plant at a minimum will save AMEA $2 million a year, said Clark. “That’s $40 million over the 20-year life of the contract,” he noted.
The solar project does not include energy storage because battery prices are still too high, but “personally, I believe battery technology is going to improve,” Clark said, adding that the utility’s contract with Lightsource BP gives AMEA the right to add storage to the solar project, if the technology becomes economic.
Established in 1981, AMEA is a coalition of public power utilities that provide power to the Alabama cities of Alexander City, Dothan, Fairhope, Foley, LaFayette, Lanett, Luverne, Opelika, Piedmont, Sylacauga, and Tuskegee.