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CMS Energy's (CMS) Arm Signs 140MW Solar PPA in Michigan

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Zacks Equity Research
·4 min read
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CMS Energy Corp.’s CMS principal subsidiary, Consumer Energy, recently signed a 25-year power purchase agreement (PPA) for renewable energy with Michigan’s Calhoun Solar Center. Per the terms of the transaction, Consumers Energy will buy 140 megawatts (MW) of clean energy from the solar facility, which is expected to be completed in 2022 with projected generation capacity of 200MW.

This agreement reflects a step forward by Consumers Energy toward its Clean Energy Plan, which includes the addition of approximately 1,100 MW of solar through 2024.

Consumers’ Solar Adoption

In line with the global transition toward a greener environment, Consumers Energy plans to reduce carbon emissions by more than 90% by 2040 and eliminate the use of coal to generate electricity during this time frame over the long run. With solar energy being one of its strengths in renewables, we expect to see a notable expansion in Consumer Energy’s solar portfolio. The clean energy purchase from Calhoun Solar Center is a bright example of that.

In January 2021, Consumers entered into an agreement to purchase a solar generating facility under development in Michigan, with capacity of up to 150 MW. Consumers expects to take full ownership and begin commercial operation of the project in 2022.

No doubt, these initiatives will strengthen Consumer Energy and thereby CMS Energy’s position in the global solar market.

Solar Energy Prospects & Utilities

Overcoming the challenges offered by the COVID-19 impacts, the solar market in the United States is once more back on track. Evidently, per the latest Solar Market Insight Report released by the Solar Energy Industries Association (SEIA), solar accounted for 43% of all new electric generating capacity additions through the third quarter of 2020, more than any other electricity source.

Looking ahead, solar installations from 2021 – 2025 are now projected to exceed 107 gigawatts-direct current (GWdc), which indicates a 10 GWdc increase from last quarter, driven primarily by increases in the utility-scale solar pipeline.

Surely such improved projection offers ample growth opportunities for utilities that are expanding their renewable portfolio, with solar constituting a major portion. In this regard, utilities that are worth mentioning include Dominion Energy D, Duke Energy DUK, and DTE Energy DTE. Dominion has helped bring 2,200 MW of solar into operation in 10 states since 2013. The company currently plans for a significant expansion of large-scale solar energy in Virginia, wherein at least 15,900 MW of new solar energy could be added in the next 15 years.

Duke Energy has been aggressively investing in solar energy to reduce its carbon footprint. Notably, Duke Energy Florida is investing to bring 700 MW of solar online by 2022 and has filed a $1 billion shared solar program called Clean Energy Connection, which will add another 750 MW of solar by the end of 2024.

DTE Energy has spent $170 million in developing solar parks since 2008. The 31 solar arrays in its portfolio generate enough clean energy to power more than 14,000 homes. Its latest plan includes bringing online an additional 420 MW of solar energy by 2022, or enough clean energy to power 120,000 homes.

Zacks Rank & Price Performance

CMS Energy currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past year, shares of the company have lost 3.6% against the industry’s gain of 10.1%.

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