How Much Is Apple Really Paying For Power In Its 850M Solar Deal?

Solar Energy / Economics

Date posted: 02/27/15

Christopher Helman asks if it make sense for Apple to lock in electricity prices at twice the going rate. You probably heard the news already - Apple Computer is teaming up with First Solar to invest 850 million dollars on a 2,900-acre, 280 megawatt solar farm in Monterey County, Calif. Everyone other than the owls, lizards and San Joaquin kit foxes that live on the land seem to think this is a really great deal, an example of the biggest company stepping up and doing something constructive about climate change or whatever. Helman was curious about how good or bad a deal this is for Apple shareholders. He started the review by correcting some early misconceptions. First, Apple will not be owning a piece of the solar installation, rather it is just buying the electricity output of the plant. Second, Apple will not be investing its 850 million dollars upfront, rather it will be buying the power as it is generated over 25 years. Third, Apple will be getting the electricity generated by 130 MW of installed photovoltaic capacity - out of 280 MW total, but the actual amount of power it receives will not be anywhere close to 130 MW. For Apple, Helman concluded that the 25-year power purchase agreement appears to be an excellent hedge against all these uncertainties. It would smooth out operating costs and enables Apple to further bolster its image as a responsible corporate citizen. But...what happens to the deal if government subsidies are reduced or removed, when the O and M costs come in higher than expected which will force First Solar to change the Apple deal, and if his calculations are way too optimistic.