Without the fanfare six years ago when multi-billion-dollar contracts were signed with major utilities, two large-scale solar thermal projects in California have been sold and their 20-year offtake utility contracts canceled. This comes at a time when Congress and the Obama administration are proposing to cut federal dollars related to renewable energy development and investment banks have become skeptical toward the green energy space, particularly solar.
Approved by state regulators five years ago, the two contracts with Southern California Edison Co. (SCE) and Sempra Energy's San Diego Gas and Electric Co. (SDG&E) involved separate projects using Stirling Energy Systems (SES) technology and its development unit, Tessera Solar. The Arizona firms were the poster children for California's gold rush into solar thermal projects, which has resulted in more than a half-dozen more major projects working through the California siting process. One, BrightSource Energy's Ivanpah, is under construction (see Power Market Today, Aug. 10, 2010).
Meanwhile, the independent consumer unit at the California Public Utilities Commission (CPUC) last Friday urged the governor-appointed commissioners to be tougher in approving what it argued are out-of-market-compliance solar contracts for utilities. The CPUC Division of Ratepayer Advocates (DRA) urged the regulatory commissioners to "be more discriminating" when it comes to the over-market prices that solar projects are fetching.
Christopher Horner, a senior fellow with the Center for Energy and Environment, told Congress earlier this year that the European Union (EU) failed experiment with solar subsidies should be a clear indication the United States does not need to duplicate that series of government subsidies. "It is hard to imagine a more compelling admission of failure, and exhibit to reevaluate continued support [for government solar]," Horner said.
He said an EU study acknowledged that Europe's renewables strategy is "a big gamble where the stake is enormous, the risk of losing is high and the reward for winning is very modest. In other words, it is economically reckless."
On Wednesday NRG Energy Inc. CEO David Crane voiced support for renewables at the Jefferies 11th Global Clean Technology Conference in New York City. Crane said that by 2015 he expects NRG's involvement in clean technology to equate to 25% of its annual earnings.
Calling it the "tyranny of natural gas," Crane said that without the renewable push or the advocates for nuclear, only gas-fired generation plants would get built, and with the current low gas prices developers don't want to build them right now. He thinks a combination of wind and solar, supported by additional nuclear power generation, needs to be developed between now and 2025.
The "game-changers" will be the bigger development of electric vehicles and solar, said Crane, who emphasized that NRG acquired Green Mountain Energy Co. last year to greatly expand its renewable footprint with the goal of lessening the power plant operator's natural gas dependence.
With the two California projects that have changed hands, Stirling ran into financial troubles, which apparently have made impossible for it to obtain financing for the two projects that collectively are estimated at costing several billion dollars, even with the long-term utility contracts. New owners -- K Road Sun LLC for the 850 MW Calico project and AES Solar for the 709 MW Imperial Valley proposal -- have not indicated what they will do in terms of technology, timetables, financing and power purchase contracts.
In its "Green Rush:" Investor-Owned Utilities' Compliance with the Renewable Portfolio Standard," the CPUC consumer unit has published an analysis of the hundreds of contracts signed between solar and other renewable developers and the utilities, such as SCE and SDG&E, concluding that the CPUC has approved too many contracts that exceed their own standards for economic viability.
"The CPUC has approved nearly every renewable contract filed by the utilities, even when contracts rate poorly on least-cost, best-fit criteria," said the DRA report, which goes on to recommend that new limits be placed on contracts that exceed above-market cost by more than $100 million, along with establishing overall annual contract cost limits for each of the major private-sector utilities.
According to the DRA report, 59% of the three major investor-owned utilities' renewable contracts are above the market price referent. In addition, data supplied by the utilities indicated that contract and project failures are most often the result of "problems in securing financing [Stirling/Tessera's experience]; inability to secure necessary permits, and/or site control; and transmission problems."
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