Warren Buffett Unveils Deal to Buy Big Piece of Texas Electric Grid

7.7.17

Warren Buffet is making a play for Texas’ largest electric transmission utility.

Berkshire Hathaway, the famed billionaire’s multinational conglomerate, unveiled a roughly $18 billion deal Friday to buy Oncor, whose roughly 120,000 miles of transmission and distribution lines deliver power to more than 3 million homes and businesses in North and West Texas.

If approved, the deal could help deliver Energy Future Holdings, Oncor’s parent company and Texas’ largest power conglomerate, from one of the largest corporate bankruptcies in American history. That company, which filed for Chapter 11 bankruptcy in 2014, is saddled with about $50 billion in debt.

“Oncor is an excellent fit for Berkshire Hathaway, and we are pleased to make another long-term investment in Texas — when we invest in Texas, we invest big,” Buffett said in a joint news release from Berkshire Hathaway and Oncor.

The proposed merger would need the sign-off of the Delaware judge overseeing Energy Future Holdings’ bankruptcy, along with approvals from the Public Utility Commission of Texas and federal regulators.

Berkshire Hathaway would pay $9 billion cash for Oncor and assume its debt, making the deal worth roughly $18 billion.  

Bob Shapard, Oncor’s CEO, called the latest proposal “a great outcome for Oncor.”

“By joining forces with Berkshire Hathaway Energy, we will gain access to additional operational and financial resources as we continue to position Oncor to support the evolving energy needs of our state,” he said in a statement. 

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NRG Sees Buyers Circling for Renewables Unit Amid Cost-Cut Plans

7.18.17

NRG Energy Inc. says buyers are hungry for the company’s renewable-energy business as the power generator looks to cut debt and sell assets under pressure from billionaire investor Paul Singer.

Almost a week after the largest U.S. independent power producer disclosed that it’s looking to slim down, the company is seeing “robust engagement from a variety of potential co-sponsors or sponsors” for its clean-energy units, Craig Cornelius, senior vice president of renewables, said in a phone interview Tuesday. NRG is moving to shed as much as $4 billion of assets, including a stake in its NRG Yield Inc. yieldco, as part of a deal with Singer’s Elliott Management Corp. and turnaround titan C. John Wilder’s Bluescape Energy Partners.

“In almost every dimension, it’s a pretty substantial renewable-energy enterprise,” Cornelius said. “It exceeds the scale of anything that’s going into a process like this.”
NRG is pursuing a sale at an opportune time. While yieldcos -- companies formed to own assets with predictable cash flows -- have amassed little equity in the public markets recently, a large and deepening pool of buyers covets the assets they own: wind and solar farms that benefit from long-term contracts with utilities. These buyers include pension funds and insurance companies with long-term liabilities that neatly dovetail the utility contracts.

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Renewable Energy Not a Threat to Grid, Draft of U.S. Study Finds

7.14.17

Wind and solar power don’t pose a significant threat to the reliability of the U.S. power grid, Energy Department staff members said in a draft report, contradicting statements by their leader Rick Perry.

"The power system is more reliable today due to better planning, market discipline, and better operating rules and standards," according to a July draft of the study obtained by Bloomberg.

The findings -- which are still under review by the department’s leadership -- contrast with Perry’s arguments that "baseload" sources such as coal and nuclear power that provide constant power are jeopardized by Obama-era incentives for renewable energy, making the grid unreliable.

“I’ve asked the staff of the Department of Energy to undertake a critical review of regulatory burdens placed by the previous administration on baseload generators,” Perry said last month. “Over the last several years, grid experts have expressed concern about the erosion of critical baseload resources.”

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Texas Is Too Windy and Sunny for Old Energy Companies to Make Money

6.20.17

As attractive a renewable-energy concept as wind power is, it’s plagued by a fundamental flaw. It blows the most in the dead of night, precisely when there’s the least demand for electricity. That’s true for just about every wind-blown spot across the U.S., from the foothills of the Tehachapi Mountains in California to the coastal plains of North Carolina.

And then there’s South Texas.

It is to wind, engineers have discovered in recent years, a bit like what Napa Valley is to wine and Georgia is to peaches. For not only does the state’s Gulf Coast generate strong evening gusts, but it also blows fiercely in the middle of the day, just as electricity consumption is peaking.

It’s the result of something called convection currents—a phenomenon caused by the gap between the temperature on the water and land—and it’s allowing wind farms owned by Apex Clean Energy Inc. and Avangrid Inc. to tap into the midday spike in electricity prices that comes as air conditioners start to hum.

In the cut-throat Texas energy market, the construction of these coastal wind turbines—some 900 in all—has had a profound impact. It’s been terrific for consumers, helping further drive down electricity bills, but horrible for natural gas-fired generators. They had ramped up capacity in recent years anticipating that midday price surge would mostly be theirs, not something to share with renewable energy companies. Without that steady cash influx, the business model doesn’t really work, the profits aren’t there and companies including Calpine Corp., NRG Energy Inc. and Exelon Corp. are now either postponing new gas-fired plants or ditching them all together.

Wind power “is a disruptive technology and it’s increasing,” said Paul Patterson, a utility analyst at Glenrock Associates LLC in New York. “That’s a problem for other resources that are competing in that market.”

And it’s not just the coastal turbines that are cutting into gas-fired plants’ business. When inland farms are included, wind power now supplies about a fifth of Texas’s electricity market. Solar power is also growing in the state. All of this helped push the average on-peak price set by Ercot—the grid operator that controls most of the Texas market—down 55 percent the past five years to $25.34 per megawatt hour, according to data compiled by Genscape Inc.

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Searing Heat Is Hurting Texas Wind Power

7.5.17

Temperatures are soaring across Texas, and that’s bad news for the state’s wind power generators.

Wind farms -- which now account for about a fifth of the state’s power mix -- are forecast to generate significantly less electricity this week as the heat builds and keeps turbines from spinning. Wind generation may peak at about 5,900 megawatts on Thursday and 6,900 megawatts Friday, less than two-thirds of what they totaled a week earlier, according to grid manager Electric Reliability Council of Texas, or Ercot.

The decline in power supplies may hit just as Texas needs them most. Temperatures are forecast to reach 100 degrees Fahrenheit (38 Celsius) in some areas, a heat that’ll have people using more power to blast their air conditioners. That may touch off a rally in Texas’s wholesale electricity prices as more costly fossil-fuel generators such as coal and natural gas plants step up to help meet demand.

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West Texas Transmission Line Project Takes A Step Forward

7.3.17

Huge new transmission lines could be coming to Far West Texas.
Utility companies say almost 200 miles of high-voltage power lines are needed to serve the oil and gas industry. The project is still in its early stages, but it could face opposition. 
The state grid operator ERCOT recently endorsed the project, saying its own study agreed with what utility companies Oncor and AEP had found: that rural West Texas is using a lot more power.
“They had new oil and gas customers that had come and said hey we have this new load that wants to connect to your system,” says Jeff Billo, ERCOT’s Senior Manager of Transmission Planning.
The project calls for new high-voltage lines across five sparsely-populated counties near the New Mexico border.
Oil and gas is an up-and-down industry, but Billo says growing oil production is still creating long-term power needs in these areas.
“Once you have these wells on your system, once you have these processing plants, that demand does not go away,” he says. 
These huge lines would be the first of their kind for much of this region. So there could be a land battle brewing here.

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A ‘volatile’ market: How Austin Energy traders buy, sell power

7.5.17

It’s 10:10 a.m. on a sunny morning last week and Lei Ye is staring at charts of energy prices updating every few minutes.
In front of him and several other staff in the same room are banks of half a dozen or more wide-screen computer monitors showing the day’s predicted market and real-time data prices for electricity and natural gas. Looming behind Ye is a large television screen showing live weather conditions across the state that play an important role in each minute’s price of a megawatt-hour of electricity.

It resembles a cross between a trading room floor and NORAD, and here millions of dollars are spent and made per day in attempts to take advantage of the energy market’s fleeting sweet spots as people across the state decide whether to fire up their air conditioning units under a blistering Texas sun.

“It’s comparable to the New York Stock Exchange,” said Austin Energy spokesman Robert Cullick.

But these traders aren’t working for a high-powered investor, they work for Austin Energy. And they aren’t working on a trading floor, they are seated at the utility’s Energy Market Operations center on the second floor of Austin Energy’s office on Barton Springs Road.

They work not to turn a profit for investors, but to help save money for Austin Energy’s customers.

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Texas firm raises $900M for rooftop projects

6.14.17

A little-known Houston company that finances home solar has raised more than $900 million for a nationwide expansion with the eventual goal of "hundreds of millions of systems on rooftops," according to a company spokesman.

Summoning that level of cash is typically the terrain of larger, publicly traded rooftop-solar companies, such as Sunrun Inc., Vivint Solar Inc. and SolarCity Corp. (now part of Tesla Inc.). Even then, few have marshaled such a large sum so quickly.

Sunnova Energy Corp., founded in 2012, doesn't sell or install solar systems. It finances the projects through power-purchase agreements or leases, leaving other parts of the business to local partners, and guarantees that the systems work during the length of a 25-year contract.

That investors banked on the company is a signal of overall confidence in the solar industry, said Nicole Litvak, a solar analyst at GTM Research. "It is a good sign that Sunnova is still raising money," she said.

Sunnova currently has more than 40,000 customers, according to Jordan Fruge, Sunnova's chief marketing officer, who didn't offer details on where or how quickly the company plans to expand.

However, Litvak estimated that, based on the amount that Sunnova has raised, it could add 350 to 400 megawatts of solar power.

Like many rooftop-solar firms, Sunnova is also experimenting with supplementing its solar systems with batteries in order to add value and perhaps one day aggregate its solar fleet to interact with the grid.

Fruge said the company is trying out several energy-storage manufacturers, including Tesla, Enphase Energy, Mercedes-Benz and LG Chem Ltd., at installations in Hawaii.

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CPS Energy Named Public Power Utility of Year

6.27.17

SEPA Awards San Antonio Utility for Excellence in New Generation Solutions

CPS Energy was named the Public Power Utility of the Year award by the Smart Electric Power Alliance (SEPA) for the utility’s forward thinking in new generation sources and using technology on the grid to facilitate access to distributed energy resources.

CPS Energy is an industry leader for its diversification of its energy portfolio while embracing renewable energy and new technologies to meet its energy demands. The utility is installing battery storage and distributed generation such as solar panels to both improve reliability and reduce the demand for electricity.

“This is about us putting into practice our thought leadership around meeting customer expectations. Many of our customers want reliable, clean electricity – preferably with little or no emissions,” said President & CEO Paula Gold-Williams. “Where some other utilities talk about how it could be done, we ask ourselves how it can be done today.”

Gold-Williams said the utility already has 76 megawatts of installed rooftop solar in addition to nearly 450 megawatts of solar farm generation and is looking for ways to install even more in the future. Leveraging technologies such as the smart meters the utility has installed on its system, Gold-Williams said the utility has already achieved state leadership in this area. Beyond our state borders, the SEPA award recognizes that leadership.

“It’s always great to be recognized for your efforts, but it’s truly motivating to be recognized as a national leader like we are with the SEPA award,” Gold-Williams said.

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ERCOT Board approves transmission project in West Texas

6.14.17

AUSTIN, TX - The ERCOT Board of Directors has endorsed a transmission project that includes two new 345-kV lines to help address future reliability concerns in the growing region of Far West Texas.

"We continue to see a tremendous amount of load growth in West Texas," said ERCOT Senior Manager of Transmission Planning Jeff Billo. "Based on projected load growth in this area, these new lines will be needed to support system reliability in the coming years."

Increased oil and natural gas exploration in the Permian Basin area in Far West Texas has contributed to high load growth in the region. Between 2010 and 2016, the average load growth in Far West Texas was about eight percent. An increase in the number of generation projects, mostly solar, being developed in this region is also a factor.

The new high voltage power lines will be built by transmission service providers Oncor, American Electric Power Service Corporation (AEPSC) and the Lower Colorado River Authority Transmission Services Corporation. Oncor and AEPSC initially proposed the project to the ERCOT Regional Planning Group in April 2016.

An independent analysis performed by ERCOT confirmed the project’s necessity. ERCOT analyzed more than 40 options and proposed the most cost-effective option to meet reliability needs in the area.

The project will include a new, 345-kV transmission line that will connect the Odessa and Riverton substations. It will span approximately 101 miles across Ector, Winkler, Loving and Reeves counties. In this area alone, peak electricity demand has jumped from 22 MW in 2010 to more than 200 MW in 2016. It is projected to exceed 500 MW by 2021.

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