BlackRock’s GIP Takeover of Utility AES

^{The content below is provided for information purposes only. It is not intended to amount to advice on which you should rely.}

^{Third Bridge does not make any warranties or representations, expressed or implied as to the currency, accuracy, completeness, timeliness or fitness for any particular use of the content below. Third Bridge accepts no liability for the content or for any errors, omissions or inaccuracies in respect of it.}

AES Corp – Deteriorating Renewable Energy Segment Outlook & Potential Load Growth Tailwinds

Key insights 

• Expert expects Trump's new tax bill to increase average solar PPA prices by 30-40% over the next 5-10 years, with an initial 10-12% rise in the next four years and the remainder spiking from late 2029
• Despite potentially significant solar PPA pricing increases, specialist does not expect significant reduction in solar off-take demand, given concurrent broader electricity price inflation
• AES will likely focus on safeharbouring short-term pipeline projects and reducing costs. Cost reduction will likely come from lay-offs and putting pressure on engineering, procurement and construction contractors – "the industry, by and large, is expecting EPC margin compression
• Expert thinks AES is wellpositioned to supply energy for data centres, citing experience with around-the-clock power supply for technology customers and a diverse generation portfolio
• Valuation of AES's development pipeline is likely pressured by policy risk, presenting an opportunity for infrastructure investors and strategic buyers with long time horizons

Already a client? Access the full transcript.

US Utility-scale Solar – Demand Drivers & Cost Pressures

Key insights 

• Experts think data centres' optimal energy mix may include 30-40% solar, with remainder from other sources, balancing solar's lowest levelised cost of energy vs reliability and land needs
• Four acres are needed per megawatt of solar. 4-5MW of solar capacity is required for every 1MW of forecasted data centre demand
• Due to grid saturation and reliability needs, solar projects now require energy storage to be viable. Solarplus-storage arrangements for data centres could require 3-4x the CAPEX of solar-only projects. Levelised cost of energy is USD 65-120 per megawatt-hour, depending on level of accepted curtailment, regional irradiance and backup power options
• On solar-data centre agreements, expert expects 10-15 year contracts with 25-30% premiums over broader PPA pricing
• Tariffs on imported battery cells and resulting increases in domestic supplier pricing power will likely raise solar-plus-storage CAPEX by 10-20% in 2025, driven by battery cost inflation

Already a client? Access the full transcript.

Powering Data Centres – Feasibility of Load Growth Expectations & Solar's Role

Key insights 

• Data centre-related load growth expectations have tempered significantly, though the expert estimates "10% to the low teens" growth annually over the next 5-10 years
• Data centre operators are trending towards locating facilities in areas with abundant low-cost energy, such as desert regions with high solar availability. Given aggressive sustainability goals, the expert expects solar to have a meaningful role in powering data centres
• Data centre energy agreements will likely include power purchase, wholesale power and demand response agreements, depending on the operator's needs. No one contract structure is likely to dominate
• Cost per watt for US solar is projected to continue declining over the next 5-10 years, driven by innovation, scale and continued regulatory support
• Expert expects 45X production tax credit cost benefits to be shared between manufacturers and customers in the long term, diminishing margin upside to solar equipment manufacturers

Already a client? Access the full transcript.

US Utility-scale Solar – Solar Farm Co-location Opportunities & Long-term Merit Order Positioning

Key insights 

• Expert reiterates view that data centres may trend towards co-locating with solar farms in desert areas, leveraging high irradiance for cheap power. However, water constraints will be major trade-off and could eat into any power cost savings
• Co-location of storage with solar farms to optimise generation profiles may be unnecessary. Pairing solar with wind can create complementary generation profiles
• Expert thinks opportunity from retiring coal communities could be attractive, but stresses solar's competitiveness may come down to political factors such as relative job creation, in addition to local resource availability. Gas-fired turbines provide more jobs than solar farms due to low operations and maintenance intensity
• Expert thinks the long-term competitiveness of solar will ultimately divorce from policy direction, and will depend more on overall cost and local resource availability. This incentivises long-term solar development in South, while making its less attractive in New York independent system operator, as an example

Already a client? Access the full transcript.

Not yet a Third Bridge client? Request a free trial to experience the expert insights relied upon by the world's decision makers.