AMAZON POWERS ON
$700M Alberta solar project
In the latest sign of increasing corporate investment in renewable power, tech giant Amazon.com Inc. on Wednesday announced a deal that locks up 80 per cent of the power from what is being described as the largest solar project in Canada.
Located on 3,330 acres of grazing land in southern Alberta's Vulcan County, the $700-million, 465-megawatt Travers Solar Project is under construction and being developed by Calgary-based Greengate Power Corp., with an expected start date of late 2022.
It marks Amazon's second announcement this year for an offtake agreement for solar power in Alberta, as it strives to completely switch to renewable power by 2025.
The move ties into a string of recent corporate investments into renewable power, a trend taking shape in Canada and globally as tech titans such as Alphabet Inc., Facebook Inc. and Microsoft Corp. and food and beverage giants Labatt Brewing Co. Ltd. and baker Grupo Bimbo S.A.B. de C.V. announce offtake agreements.
“Renewable energy projects have historically been built on the back of government-backed power purchase agreements,” Dan Balaban, chief executive of Greengate Power, told the Financial Post, “and the industry is transitioning where we're seeing some of the largest global companies now buying renewable energy in order to meet their net zero ambitions.”
Amazon, which did not make anyone available for comment, announced it had signed 14 deals to buy 1.5 gigawatts of renewable power from wind and solar farms in Europe and the U.S. in addition to Canada.
In Alberta, Amazon said it had signed an offtake agreement for 375 megawatts from the Travers project, though it did not disclose the length of the contract or other details.
Denmark's Copenhagen Infrastructure Partners is the majority owner of the project, and will also be the operator, according to Balaban.
He declined to disclose the monetary value of the deal, but said private contracts typically run 10 to 15 years.
In April, Amazon signed an 80MW offtake agreement for another project east of Calgary also by Greengate, a private company that develops renewable energy and storage projects, primarily in Alberta.
Balaban attributed the surge in solar projects to the increasingly attractive economics, especially when compared to other energy sources.
The cost of utility-scale solar projects has fallen by 11 per cent per year on average for the past five years, compared to a five-per-cent drop for onshore wind during the same time, according to an October 2020 report by the investment firm Lazard.
“What we're certainly seeing is strong, strong growth of solar in Alberta and corporate deals being behind that boom,” said Rebecca Nadel, director of the Business Renewables Centre at the Pembina Institute. “Almost 90 per cent of the operating solar that we have has a corporate deal behind it.”
Since the start of the year, at least four other corporations have announced offtake agreements for large-scale renewable projects in Alberta that collectively would produce 268MW of renewable power, according to the Business Renewable Centre's deal tracker.
Since 2019, the deal tracker has identified 1,159MW worth of large scale commercial wind and solar offtake agreements in Alberta, of which solar accounts for 73 per cent.
Nadel said energy experts had once forecast that wind power would grow faster than solar in Alberta, although the opposite appears to be true.
“Certainly, what we're seeing is that renewables in general are more cost-efficient than new build fossil fuels,” said Nadel.
“That's a global trend.” In Canada, Alberta has lagged other provinces when it comes to developing renewable power.
Ontario currently leads the way with more than 8,000 megawatts of installed renewable power, followed by Quebec and then Alberta, both at less than 4,000MW, according to analysts at Rystad Energy.
But the same analysts project that Alberta could surpass Ontario by 2025, by adding more than 4,000MW of wind and solar.
Marcelo Ortega, an analyst at Rystad Energy in Houston, said Alberta's combination of strong wind and solar resources, and a deregulated market that allows corporations to strike power purchase agreements with generators, is driving investment in sustainable energy sources.
“We're seeing a lot of activity when it comes to renewables,” said Ortega. “It's mainly companies setting goals and then scrambling to get that capacity.”
This year, according to the International Energy Agency's 2021 outlook, energy demand is expected to rise 4.6 per cent, more than offsetting the four-per-cent drop that occurred in 2020 as the COVID-19 crisis shut down commuting to work and various other sources of demand.
The organization said it expects US$530 billion spent on all new energy generation capacity.
Of that, renewable projects are expected to account for 70 per cent of all investment.
That shift toward investments in renewables comes amid a lack of investment in oil and gas, which has led analysts at banks and trading houses to predict that a barrel of oil could rise to US$100 during the next year.
But the complex dynamics of energy markets mean that a rise in oil prices would likely make renewable power more attractive and could further accelerate the shift to renewable investments.
“Thanks to rapid technology improvements and costs reductions, a dollar spent on wind and solar photovoltaic deployment today results in four times more electricity than a dollar spent on the same technologies 10 years ago,” according to the IEA 2021 outlook.
To that point, Nadel said that the Travers project was originally conceived as a 400MW project, but was increased to a 465MW project as a result of solar engineering and technology improvements.
It is expected to create 500 jobs during construction, but only a dozen or so once operational, according to Balaban.
“I think it's really important to recognize that the transition to net zero is accelerating,” he said.
“In the near term, high priced oil and gas definitely makes renewable power look more attractive, but it ultimately is underpinned by the world's desire to move to a more sustainable future.”