Apple deal, tax change could spark solar stampede

By Nichola Groom

A staff member sets up the new iPhone 5Ss for a display picture at Apple Inc’s announcement event in Beijing in this September 11, 2013 file photo. A labour rights group said Apple Inc is unable to effectively monitor standards along some of its supply chain, allowing companies such as Taiwanese assembler Pegatron Corp to keep base wages below local living expenses. Low costs helped Pegatron win business from Apple, who moved some orders from Foxconn after an increase in labour costs aimed at addressing a spate of worker suicides in 2010, China Labor Watch (CLW) said in a report released on February 12, 2015. REUTERS/Jason Lee/Files

(Reuters) – Apple Inc’s deal to buy nearly $1 billion of power from a massive First Solar Inc plant could be the first of a stampede of contracts driven by the looming change in a solar tax incentive that makes such projects particularly attractive.

Together with a sharp drop in the cost of solar power and corporate efforts to rack up green credentials, the expiring tax subsidies have large energy purchasers taking a hard look at buying solar under big long-term contracts.

Apple on Tuesday said it would spend $848 million over 25 years to buy 130 megawatts of electricity from a 280 MW plant – the solar industry’s largest-ever corporate power purchase agreement, or PPA.

Apple’s major financial commitment gives solar a level of mainstream credibility that should entice other new customers.

“This is a market-making type of transaction,” said Tom Werner, chief executive of SunPower Corp, a U.S. solar company that is majority owned by France’s Total SA.

SunPower is already seeing a rush to get projects done before a critical federal tax credit for solar projects drops to 10 percent from 30 percent in 2017, Werner added.

SunPower, First Solar, SunEdison Inc, Recurrent Energy LLC, which is being acquired by solar panel maker Canadian Solar Inc, and 8minutenergy Renewables LLC are among the developers of the huge solar installations that cropped up to serve the utility industry. They rival the size of a coal or natural gas plant.

The Apple-First Solar deal could serve as a template for other big companies like Google Inc and Facebook Inc to use large-scale solar plants to bypass utilities when they need to power their operations.

“Given the profile of Apple and their reputation we think it’s going to stimulate a lot of other companies that may not have programs as active as Apple’s to ask questions – is there a smarter better way we can procure our energy?,” First Solar CEO Jim Hughes said.

To be competitive, large-scale solar projects need to be able to sell power for about 5 cents per kwh, a cost level that is starting to become feasible, although just barely, according to Shayle Kann, senior vice president of research at market research firm GTM Research.

With large solar projects, customers can save between 15 and 20% off their bills over the course of a contract, according to Ed Lieberman, VP of customer development at CustomerFirst Renewables, a firm that advises organizations on renewable power.

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