SunEdison, a Beltsville firm that develops solar energy plants around the world, is teaming with one of the industry's largest private-equity companies in a joint venture that could generate up to $1.5 billion in new projects.
The deal with First Reserve comes as the price of manufacturing photovoltaic cells has dropped sharply in the past 18 months, making new projects much more affordable. At the same time, a growing number of governments around the world are requiring utilities to generate more power from renewable sources — helping to kick up demand for solar.
Rhone Resch, president and chief executive of the Solar Energy Industries Association, said the deal could be a harbinger of what's to come in the industry.
"The biggest challenge we have faced in recent years is project financing," Resch said. "This starts to free up capital and allow the industry to begin to scale up."
With 350 projects built or underway, SunEdison is already one of the world's largest developers of solar energy projects. The company has a healthy backlog of plants going through the permitting process and waiting for funding.
SunEdison specializes in developing projects in areas near existing portions of the electrical grid in order to avoid large transmission costs. Its plants range from big, utility-scale operations to smaller rooftop systems feeding power to everything from Kohl's retail stores to Montgomery County school buildings. Any excess is typically sold back to utilities.
SunEdison employs about 100 people at its Beltsville offices. Last November, the company was bought by MEMC, a St. Peters, Mo.,-based manufacturer that sells silicon wafers to the semiconductor and solar industries.
"Our model has not changed," said SunEdison President Carlos Domenech. The joint venture "serves as an accelerator."
SunEdison and First Reserve have agreed to put $167 million into their new venture, which they say should be enough to attract additional debt financing to fund as much as $825 million in new projects. First Reserve may raise an additional $150 million of equity, which can be leveraged to bring the total amount of projects funded to $1.5 billion, the companies said.
"We're looking for a way to invest in solar projects and a way to do it on an economical scale," said Mark Florian, managing director of First Reserve Energy Infrastructure.
First Reserve has $20 billion under management and invests exclusively in energy projects. It has offices in Houston, London and Greenwich, Conn.
Demand for solar power is projected to grow. At least 24 states have adopted rules requiring utilities to generate power from renewable sources, and federal climate legislation contemplates a national standard. Maryland and D.C. have adopted portfolio standards, as they are known, and Virginia has established nonbinding goals, according to an Energy Department summary.
In addition, the federal government has adopted tax credits, grants and loan guarantee programs to create incentives for new solar projects.
The cost of manufacturing solar cells has fallen 40 percent in less than two years, which many attribute in part to a decision by several countries to curb incentives. Spain, in particular, moved to cap the size of its market, shrinking the opportunities there by roughly 75 percent, Resch said. Many manufacturers that ramped up production in anticipation of new orders suddenly found themselves with a glut of supply.
