Tesla Signs 90% PPA for 509 MW Arizona Solar-Storage Project Sterling
The EV maker taps ContourGlobal's KKR-backed facility for long-term clean power as AI and factory loads surge.
Tesla has secured a long-term power purchase agreement for 90% of the output from Project Sterling, a 509 MWp solar and 360 MW battery storage facility in Arizona. The deal, announced July 28, 2026, marks one of Tesla's largest third-party renewable energy procurements as the company ramps up clean power for Gigafactory operations and AI compute demands.
The facility is expected to enter commercial operation in 2028.
Scale and Structure
Project Sterling pairs 509 MWp (450 MWac) of solar PV with 360 MW of four-hour battery storage, delivering approximately 1.4 GWh of energy capacity. ContourGlobal, a power producer backed by private equity firm KKR, acquired the project at the development stage in December 2024 and now counts it as the largest renewable asset in its portfolio.
Under the agreement, Tesla will purchase 90% of the energy output while ContourGlobal retains the remaining 10% for merchant trading. The facility interconnects to the Western Area Power Administration grid, providing access to California's CAISO energy markets.
Financial terms of the PPA were not disclosed. The battery manufacturer for the storage component also remains undisclosed.
Parallel Texas Deal
On the same day, Tesla signed a separate PPA for the entire output of Lumen Farm, a 140 MW solar facility in Texas developed by Zelestra. The twin announcements signal an accelerated push to lock in clean power across multiple markets.
Strategic Shift
The arrangement highlights a notable evolution in Tesla's energy strategy. While the company manufactures utility-scale storage hardware through its Megapack business and sells solar panels, it is opting to purchase power from a third-party developer-operated plant rather than building and operating the utility-scale project itself.
This approach prioritizes speed of energy acquisition over vertical integration for Tesla's own operational loads. The move mirrors procurement strategies adopted by hyperscalers like Google and Meta, who have signed long-term PPAs to secure cheap, renewable power amid tightening US energy markets and surging demand from AI data centers.
Tesla's electricity needs have grown substantially in recent years, driven by Gigafactory operations and expanding AI compute requirements for autonomous driving development. Third-party PPAs allow the company to secure large volumes of clean energy without diverting capital and management attention from core manufacturing and vehicle businesses.
Broader Context
The Project Sterling deal arrives as US corporate renewable procurement faces headwinds from interconnection delays, transmission constraints, and rising equipment costs. Long-term PPAs with established developers like ContourGlobal offer a path to bypass some of these bottlenecks while locking in fixed-price power for 10 to 15 years.
For ContourGlobal, the Tesla agreement provides a creditworthy anchor tenant for one of its flagship renewable investments. For Tesla, it delivers a substantial block of carbon-free energy to support operations across the Southwest and California markets without requiring the company to become a utility-scale project developer.