New Deal Allows Rice University to “Test” Solar Power Under Short-term Contract

In what stakeholders are calling a “landmark deal,” a portion of the power from the 22-MW First Solar Barilla Solar Project in Pecos County, Texas will be sold to Rice University at a power price comparable to coal or natural gas under a low-risk 2-year contract that was executed by MP2 Energy.

To arrive at the deal, MP2 Energy helped Rice optimize its power purchasing. The university has a cogeneration facility that produces power that can be sold to the grid and it also participates in a demand response program. By bundling those together with 3 MW of capacity from the Barilla Plant, MP2 arrived at a solar power rate that was at the market price. 

"If you take that one step further," said Maura Yates, VP of Sustainability for MP2, "the market price is set essentially by natural gas today and so what this really illustrates is that solar truly is able to compete economically with natural gas in this environment in this scenario." 

To arrive at the market price MP2 brought transparency to Rice's power purchasing. Trey Price, Senior VP at MP2, explained: "If you think about the way a typical consumer uses power, they use less at night and then it kind of ramps up during the day. So essentially what we have done for them is highlighted that there's this piece [of your energy profile] that you use throughout the day that you don't use the rest of the time and that's really highly correlated to the solar production. So we can isolate those two pieces and say it appears that that piece generally costs more and in fact it does but when you take all the rest in context and come up with your average weighted price, it is at the market price." MP2 declined to disclose the actual price Rice will pay for the solar power.

Till now the university claimed that the cost of solar power was too high. “We’re committed to renewable energy, and for the first time, we could make a strong business case for purchasing solar power,” said Richard Johnson, director of Rice’s Administrative Center for Sustainability and Energy Management in a press release. “The ability to prove the cost model and also commit to a short-term contract made this an easy decision.”

Because Barilla was built without a credit line, developer First Solar has much more flexibility in where it sells the electrons it produces at the solar farm and most of the solar output goes into the real-time ERCOT market. This flexibility also gives First Solar the ability to offer short-term contracts. MP2, which performs energy forecasting and market interface for the Barilla plant, worked with First Solar to create this innovative, new offtake arrangement for solar generation that works within the competitive ERCOT retail market.

“This is a game changer for solar energy. We can now offer solar energy at the same rates as traditional gas or coal,” said Jeff Starcher, CEO of MP2 Energy. “It’s a lot easier for a business to commit to true renewable energy if we can provide a reasonable offtake term and a competitive price.”

The deal is similar in structure to a community solar farm, in which members of a community who want solar but cannot put it on their roofs are able to purchase a small portion of an offsite solar farm. What makes this deal different is that MP2 is the solar power offtaker and it then provides the power to Rice, alleviating Rice of the contractual obligations associated with true community solar. Also, at 3 MW, it's a much larger deal.

"What this deal highlights to the solar industry is a new business model where you can start looking at shorter-term offtake contracts," said Yates.

Most large-scale solar farms are subject to 20-year PPAs with utilities and in fact, most won't get financed unless there is a 20-year PPA in place. Yates said that is exactly the problem. "We spent the past year educating the solar industry and companies like First Solar," said Yates explaining that their message to them was "if you want the Texas [deregulated] market, you need to evolve your business model to enable shorter-term contracts." 

MP2 believes that lots of solar capacity could be sold this way and this deal is a new way forward for solar developers. "This demonstrates the business model of the future," said Yates.

Lead image: Barilla Solar Power Plant. Credit: MP2.

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