Power-sector decarbonisation is “important because efficient electrification, when paired with clean electricity, can decarbonise large parts of the transportation, buildings and industrial sectors”¹, said the US Department of Energy in its May 2023 report, On the path to 100% clean energy.

Although natural gas is, and will continue to be, the largest source of electricity generation, new installations of generating capacity “support the increase in our renewable generation forecast”, said the Environmental Investigation Agency (EIA) in its Short-Term Energy Outlook (January 2024).²

One of the contributors to this North American acceleration in renewables growth is Pattern Energy Group LP – a fully integrated developer headquartered in San Francisco and one of the world’s leading renewable energy generation, transmission and energy storage companies, with operating footprints in the US, Canada and Mexico. The company was founded in 2009 and operates around 30 renewable energy facilities with a capacity of around 6,000MW across the region, including Western Spirit, a 1,050MW wind project in New Mexico built in 2021. This article provides an in-depth profile of SunZia, the largest renewables project in the Western Hemisphere currently under construction.

Figure 1: US annual electric generating capacity (2018-2025)

Source: U.S. Energy Information Administration, Short-Term Energy Outlook (STEO), January 2024

The scheme comprises SunZia Wind, a project of approximately 3,515MW in Torrance, Lincoln and San Miguel Counties in New Mexico, and SunZia Transmission, an approximately 550-mile, 525kV high-voltage direct current (HVDC) transmission line between central New Mexico and south-central Arizona. SunZia Transmission will deliver clean power from the SunZia Wind project which, says Carlyne Mickle, “has a generation profile which is evening peaking and that complements abundant solar generation available across the western United States and supports 24/7 load matching targets”.

Figure 2: SunZia locations

Source: Pattern Energy

Mickle goes on to explain how electricity grid operators must match supply into the grid with demand peaks and troughs during the day and night and, while integrating carbon-free generation, how the “duck curve” (see Figure 3) – which captures the mismatch between demand and solar generation – has been deepening in California, with the approximately 47GW of solar capacity installed in the state.

Figure 3: Western market 'duck curve'

Source: www.eia.gov/todayinenergy/detail.php?id=56880

The EIA explains, “Extreme swings in demand for electricity from conventional power plants from midday to late evenings, when energy demand is still high but solar generation has dropped off, means that conventional power plants (such as natural gas-fired plants) must quickly ramp up electricity production to meet consumer demand. That rapid ramp-up makes it more difficult for grid operators to match grid supply (the power they are generating) with demand in real time, and this has become more pronounced in 2024, creating a risk of grid instability.”³ What the SunZia project does is “green the night” by connecting critical evening ramping and nighttime-producing wind generation to displace fossil fuels and fulfil the need for green energy in Arizona and California (see Figure 4).

Figure 4: Balancing wind and solar

Source: Pattern Energy

In the paper, ‘When should the off-grid sun shine at night? Optimum renewable generation and energy storage investments,’ published in Management Science (September 2023), the authors point out, “While solar power has risen as a sustainable and less costly option, its generation is variable during the day and non-existent at night. Thanks to recent technological advances, which have made large-scale electricity storage economically viable, a combination of solar generation and storage holds the promise of cheaper, greener and more reliable off-grid power in the future.”⁴

While battery storage installations represent a step towards 24/7 load matching in the western states, SunZia goes beyond and offers resource diversification (New Mexico wind vs. solar or in-state wind), which is valuable especially during emergency events, and scale. Both make the SunZia product very attractive to electricity buyers who have very strict procurement mandates. In addition, recent grid blackouts in California have exacerbated the need for new high-capacity and reliable transmission capacity like SunZia Transmission to support interregional reliability, Mickle adds.

US Government support has been consistent for electricity projects like these. The Department of the Interior’s Bureau of Land Management approved the project in May 2023, completing a long review process. It is seen as another milestone towards lowering energy costs, preventing power outages in the face of extreme weather and achieving President Biden’s goal of a 100% clean electricity grid by 2035.

“The SunZia Transmission Project will accelerate our nation’s transition to a clean energy economy by unlocking renewable resources, creating jobs, lowering costs and boosting local economies,” said Secretary of the Interior Deb Haaland.

Indeed, at its peak, SunZia will employ 2,000 construction workers, and more than 100 people once in operation. In addition, the project is expected to generate US$20.5bn in total economic benefits, “including direct, indirect and induced economic benefits”, according to an independent study.⁵ Pattern Energy assessed that SunZia will supply three million Americans with clean power each year, the equivalent of taking 3GW worth of coal plants offline or removing around three million cars from the road.

In addition, SunZia’s rigorous environmental siting process has resulted in optimal access to wind with minimised potential environmental impacts, leading the National Audubon Society (which is dedicated to conserving birds and their habitats) to praise SunZia for its environmental mitigation initiatives and promoting it as a case study for how future transmission projects should be developed.⁶

On 27 December 2023, Pattern announced the closing of around US$11bn financing to support the construction of the SunZia project, including a US$8.8bn construction loan and letters of credit facility provided by 17 financial institutions and a US$2.25bn tax equity term loan facility from five institutions.

The financings were attractive to lenders on the lookout for suitable sustainability-linked projects to allocate balance sheet to. Beyond the project’s strong fundamentals, having a top-tier and experienced sponsor, with an impeccable track record in the industry and on the capital markets, was critical to reaching financial close.

“Having a reliable and experienced agent is fundamental to ensure construction goes smoothly”
Carlyne Mickle, Director of Project Finance and Corporate Development, Pattern Energy Group LP

With a deal of this size and with such a large number of participants, the appointment of the right agent is key. Following a competitive request for proposal (RFP) process, Deutsche Bank’s Trust and Agency Services (TAS) team was selected to act as collateral agent and depositary bank for the approximately US$8.8bn of construction and term facilities. In addition, the TAS team is also acting as administrative agent, collateral agent and depositary bank on the holding company facility to support initial equity capital for the project. Provision of a full suite of third-party agency services for this complex multi-facility financing, along with the capacity to process up to 400 payments a month and being well regarded by the participating lenders, were among the deciding factors. “The TAS team worked very hard, with fast turnaround time from the RFP through to financial close and supported an on-time closing. We appreciated Deutsche Bank’s flexibility and commitment all along. Having a reliable and experienced agent is fundamental to ensure construction goes smoothly, especially for such a large project,” said Pattern’s Mickle.

In the various roles as third-party agent on an infrastructure project, the bank’s TAS team “assigns a dedicated team of project finance client service specialists who manage all the agency roles for the project from the draft documentation review phase to the closing and throughout the lifetime of the deal, handling draws and payments, tracking and distributing compliance reports as well as managing interactions between the borrower, lenders and external consultants,” explains Thalia Delahayes, Head of Project Finance and Loan Agency, Americas at Deutsche Bank.

Once in operation, SunZia will materially change Pattern – in that production capacity will increase by approximately 50%. “In parallel, Pattern continues to develop its 25+GW pipeline, which, beyond wind, solar, battery energy storage systems and transmission, also includes green fuels. We will continue to approach project finance and tax equity/transferability markets to finance these projects,” concludes Mickle.

On 1 September 2023, the company announced that it had started construction on its SunZia Transmission project in Corona, New Mexico. Having received the Notice to Proceed from The Bureau of Land Management, the company welcomed Secretary of the Interior Deb Haaland to the site’s “groundbreaking ceremony” that day

Sources

¹ See energy.gov
² See eia.gov
³ See eia.gov
⁴ See pubsonline.informs.org
⁵ See patternenergy.com
⁶ See southwest.audubon.org