Goldman Sachs Becomes Solar Supplier to California CCAs as Its Acquisition Spree Continues

Canadian Solar subsidiary Recurrent Energy has sold its remaining equity stake in the 100-megawatt Mustang solar project, a key resource for California’s flagship community-choice aggregators, to the Renewable Power Group of Goldman Sachs Asset Management. 

Thursday’s deal completes Recurrent’s sale of equity stakes in the 973 megawatts of solar it brought online in 2016 in California. Financial terms were not disclosed, but Canadian Solar will report sales revenue from Mustang in the second quarter of 2019.

The deal, approved by federal regulators in late March, will include the sale of Recurrent’s Class B ownership interests in the 30-megawatt Mustang, 40-megawatt Mustang 3 and 30-megawatt Mustang 4 facilities, while passive tax equity investors will continue to own all noncontrolling Class A membership interests, according to S&P Global Market Intelligence.

This is the third big renewables deal in as many months for one of the renewable energy-focused arms of Wall Street behemoth Goldman Sachs Group. In March, a subsidiary of Goldman Sachs Renewable Power, the clean energy project developer formed in 2017, bought 223 megawatts of commercial solar project leases from SunPower for $86.9 million, encompassing about 200 projects in nine states. And in April, Goldman Sachs Renewable Power bought Macquarie Infrastructure Corp.’s 142-megawatt solar portfolio, as part of a broader sale of that also included 203 megawatts of wind farms, with a total sales price of $215 million expected once the transactions are closed. 

As for the renewable power group of Goldman Sachs Asset Management that acquired Recurrent's equity stake in the Mustang project, S&P Global Market Intelligence reported in November that it was planning up to 1 gigawatt of solar assets in 2019, according to several unnamed people with knowledge of its plans. 

With the Mustang project, Goldman Sachs Asset Management has also put its money behind the first big California solar project built specifically for community-choice aggregators (CCAs) — in this case, Sonoma Clean Energy and Marin Clean Energy (now MCE), which buy its electricity under long-term power-purchase agreements (PPAs). The Mustang project was the first utility-scale solar project fully contracted with CCAs to obtain non-recourse financing, in October 2015. 

Since then, CCAs have grown by leaps and bounds, with large-scale solar projects to match. Under current procurement trends, CCAs are increasing their current 2 gigawatts of renewables under contract by another gigawatt this year, and they are set to hit 10 gigawatts by 2030, with an increasing amount coming in the form of long-term PPAs. 

In fact, CCAs are cropping up so fast that PG&E, already in bankruptcy due to its multibillion-dollar wildfire liabilities, has lost 2.4 million of its 5.4 million electricity customers to the 12 CCAs in its region, with more planned to open this year. And San Diego Gas & Electric, facing the impending departure of the city of San Diego and about 40 percent of its load to a CCA, has been reportedly exploring a path to exit the energy procurement business.

Recurrent highlighted its leading role as CCA solar power provider, citing Wood Mackenzie Power & Renewables’ latest U.S. utility-scale solar research showing it with 42 percent of all signed electricity contracts with CCAs. That includes its 150-megawatt Mustang 2 solar project, which contracts 100 megawatts of power to CCA Peninsula Clean Energy and 50 megawatts to the Modesto Irrigation District, and which Recurrent sold to Solar Frontier Americas in December. 

Beyond being the first to sign their own solar contracts, MCE and Peninsula Clean Energy are also leading the CCA pack in obtaining investment-grade credit ratings, another important step for bringing in the financing needed to match their big renewable energy goals. At the same time, the fact that CCAs are expected to procure the vast majority of the state’s future energy and capacity needs has alarmed some state regulators, and led to policy and legislative proposals that could expand the state’s regulatory oversight of how CCAs manage their long-term procurements.