AES, Riverstone in $1-billion solar power joint venture

SolarPower producer AES Corp. of the US and private equity firm Riverstone Holdings LLC are creating a joint venture, AES Solar, with an investment of up to $1 billion, for solar power development in Europe and Asia.

The two partners will invest $500 million each. The venture will develop, own and operate utility-scale solar photovoltaic installations of sizes ranging from less than 2 MW to 50 MW, which will be connected to power grids supplying electricity to homes and businesses. Photovoltaic panels are used to capture sunlight and convert it into electricity, which is then (in a utility-type installation) fed to the power grid.

According to AES, the venture will follow "the traditional independent power producer and wind business growth models" by initially focusing on developments and projects in those countries offering the most attractive tariffs. As the costs of both PV panels and installation come down, AES Solar will consider expanding into other countries with appropriate market incentives, with the goal of "grid parity" - being competitive with conventional fuels.

This is why, perhaps, these American companies are not considering the US market right now. Some European and Asian countries, such as Germany, Italy, Spain and South Korea, offer long-term subsidies allowing power companies to earn over 10 per cent annual return on average on renewable energy.

The US policy is not so friendly, which is why, according to a study, the installation of photovoltaic panels is a mere eighth of that in Germany, which provides several incentives for renewable energy plants. If the US, which has plenty of sun and wind, follows the European policy lead, it could become the biggest market for renewable energy.

Says AES president and chief executive officer Paul Hanrahan, "Renewable energy is an increasingly significant part of AES's overall portfolio and currently accounts for 20 per cent of our global generation capacity. Solar is a natural extension of our business, much as wind generation has been, and we see tremendous opportunity for growth in this market."