The rise of the big solar power plant owners

While 2011 will be remembered as a troubling year for solar manufacturers, it also is a year when major U.S. power companies took a plunge into investing and owning a lot more solar power plants. Duke Energy’s (s DUK) recent announcements reflect this increasing interest. The company, which is a big wind farm owner, announced five solar project purchases in the past month alone.

The five included two Arizona projects that Duke announced this week: a 5 MW project and a 15 MW solar farm from Recurrent Energy for an undisclosed price. The projects are the first solar generation power plants in the western United States for Duke. The purchase followed the acquisition of three, 1 MW solar projects in North Carolina that it announced last month. Overall, the company, though its Duke Energy Renewables, has announced ownership to 11 projects totaling 51 MW. Duke sells electricity from these projects to utilities or other business customers.

In addition, Duke is developing solar power projects through a joint venture it created with Integrys Energy Services and Smart Energy Capital last year, and the joint venture has done projects totaling over 1 MW this year.

The sizes of these acquisitions are small but signal a new focus for a company that has historically considered wind a much more lucrative renewable energy business. Duke’s increasing investments in solar also reflect a broader trend in which major producers of fossil fueled-based power view solar energy as a money maker. These well-funded companies are becoming either customers of newer and often smaller companies that focus only or primarily on solar project development or competitors, particularly if they end up creating their own, internal solar power project development team.

Rising interest in solar

What accounts for the rising interest in solar? For one thing, prices for solar panels and other equipment have fallen quickly in the past few years. In this year alone, solar panel pricing has plummeted by around 40 percent, thanks in part to a glut of them that were destined for Europe, the world’s largest solar market. Solar manufacturers in the United States, Europe and Asia have been reporting declining profits or posting losses and announcing factory closures, layoffs and bankruptcies.

Meanwhile, electric retailers continue to sign power purchase agreements for solar in order to meet their states’ renewable energy mandates. California has been the golden market for solar energy sales because of the state’s aggressive goal of obtaining 33 percent of its power supply from renewable sources by 2020. However, because utilities in California and some of the states with renewable energy mandates already have inked a lot of contracts for solar, they may not be signing more of them at the same pace as they did in the past, at least not in the short term.

Still, the energy industry sees the policy shift that favors renewable energy in the long run.  Duke’s CEO, Jim Rogers, summed up this perspective when he was on a panel at the Solar Power International conference in Dallas in October.

“By investing in solar, you are putting a hedge against what a lot of us think is inevitable, and that is carbon regulation. That’s a smart hedge,” Rogers said during the conference. Duke bought wind power project developers before and may do the same in solar.

Duke’s solar investments pale in comparison to other power companies, however. MidAmerican Energy Holdings, controlled by Warren Buffett’s Berkeshire Hathaway, announced last week a plan to snap up a 550 MW solar farm that is being built by First Solar (s FSLR). The project represents MidAmerican’s foray into solar generation. Exelon (s EXC) is another power producer who took a big bet in solar earlier this year when it agreed to buy a 230 MW solar farm that is under construction in California from First Solar. Exelon previously owned a 10 MW solar project in Chicago that was completed in 2010.

Other power producers that have actively invested in solar energy generation include NextEra Energy, Sempra Generation and AES Solar. AES Solar is a joint venture between AES and River Stone Holdings, a private equity firm, and the company seems to have been quicker to develop projects in Europe than in the U.S.

NRG Energy (s NRG) has perhaps invested more heavily in solar generation projects in the U.S. than other traditional power producers. The company owns stakes in gigawatts of solar power projects, including some of the largest in the U.S. There are the 250 MWac project being built by SunPower in San Luis Obispo County, the 392 MW solar thermal power plant being built by BrightSource Energy in California’s Mojave desert, the 290 MW Agua Caliente project in Arizona (sold by First Solar), and a 752 MW project to put solar panels on a bunch of commercial rooftops.

NRG, which jumped into the solar energy market in 2009, also recently bought a solar power project developer, Solar Power Partners, for an undisclosed sum.

Photos courtesy of Duke Energy