The electronics manufacturer reports that it will power all of its U.S. facility with electricity from the 270 MW Shakes Solar project in Texas, developed by Cypress Creek Renewables.
Danfoss signed a power purchase agreement (PPA), which it said will cover all of the company’s U.S. facilities with renewable energy. Through the PPA, the Denmark-based electronics manufacturer will purchase 185,000 MWh annually, which runs until 2032.
Danfoss reportedly has 24 factories and 36 locations across the United States.
Danfoss acquired the PPA from Axpo US, an affiliate of Axpo Solutions, an international energy developer that had acquired the renewable energy credits for electricity generated by the 270 MW Shakes Solar project in Carrizo Springs, Texas. Shake Solar was developed by Cypress Creek Renewables and began operations at the start of 2023.
PPAs are highly customizable and flexible, but even so, Danfoss agreement’s short duration is unusual. PPAs typically fall within a 10-to-25-year range, most commonly for 15 to 25 years due to the more attractive terms and pricing that come with longer term agreements.
Danfoss told pv magazine USA the company signed the PPA of less than seven years because it fit the needs of both Danfoss and Axpo from a project that was already operational.
As long-term contracts, PPAs are linked to a specific solar project, so the electricity prices are locked in for the duration of the long-term contract. The Texas ERCOT grid has the cheapest PPA prices in the country at $44.00 per MWh, which can widely vary by region. Nationwide, PPAs cost an average $57.04 per MWh, with the highest prices in the northeast at $116.06 per MWh in the NYISO region and $111.50 per MWh in the ISO-NE grid.
(Read: Despite wind and solar’s low costs, PPAs remain vital)
PPAs can be physical or virtual. Danfoss’ PPA is tied to a project in Texas, but as a virtual PPA, Danfoss will not physically power its facilities with the electricity that was generated in Texas.
However, companies can support renewable energy by purchasing renewable energy credits (RECs), the currency of clean energy. Each REC represents 1 MWh of renewable energy produced and delivered to the power grid. RECs make it possible to credibly claim an electricity purchase was for a renewable energy source because they are trackable from the point of generation to the customer. Virtual PPAs are purely financial transactions that guarantee cash for the renewable energy project based on its output.
In this case, Danfoss is purchasing electricity generated at the Shakes Solar project in Texas, but the electricity generated will travel through a 148 kV transmission line to the Asherton substation over 16 miles away, where the electrons will then be delivered into people’s homes and other destination points. The Shakes Solar Project uses First Solar Modules Series 4 and Series 6 coupled with trackers.
Torben Christensen, the chief sustainability officer and head of global services of Danfoss, said the milestone is part of the company’s efforts to decarbonize its operations by 2030.
