Big Solar is on a roll in California.
For the second time in seven weeks, the California Energy Commission has voted to accept an application for a massive megawatt solar power plant. The commission on Wednesday certified as “data adequate” Silicon Valley startup Ausra’s application to build a 177-megawatt solar on the state’s central coast. That means Ausra’s Carrizo Energy Solar Farm has cleared a significant regulatory hurdle and the commission will begin a year-long review process. If all goes well, construction will begin in 2009 and the plant will start producing electricity in 2010. (To get an idea of the complexity of the California licensing process and why the acceptance of an application is a big deal, you just need to scan Aura’s 1,000-page application package.
The Ausra move follows the commission’s Oct. 31 vote to greenlight for review BrightSource Energy’s planned 400-megawatt power station complex to be built in the Mojave Desert on the Nevada border.
Ausra, backed by A-list venture capitalists Vinod Khosla and Kleiner Perkins Caufield & Byers, has signed a 20-year power purchase agreement with utility giant PG&E (PCG) for the greenhouse gas-free electricity generated by the Carrizo plant in eastern San Luis Obispo County. BrightSource (backed by Morgan Stanley (MS) and VantagePoint Venture Partners), meanwhile, continues to negotiate with the utility for a 500-megawatt power purchase deal.
Green Wombat 
Disappointing Outcome for Renewables
The Production Tax Credit (PTC) for Wind Energy and the Investment Tax Credit (ITC) for Solar Energy were not part of the Energy Bill passed by the Senate by an 86-12 margin on Thursday. Wind Energy currently receives .02 cents per kilowatt/hour (kwh) of production while commercial solar projects receive a 30% Federal Tax Credit. Residential solar projects receive a $2,000 federal tax credit. These credits are set to expire by the end of 2008. Without an extension of the Tax Credits, the Solar and Wind Industries in the United States will quickly grind to a halt. This will significantly impact companies ranging from Sunpower (SPWR), First Solar (FSLR), Evergreen Solar (ESLR) to General Electric (GE), Sanyo (SANYY) and British Petroleum (BP).
The Energy Bill that passed the Senate is being hailed for the first increase in automotive fuel efficiency standards in over 2 decades, and well it should. As written, the current legislation would increase fuel economy standards by 40%. The fleetwide standard would increase from the current 25 mpg to 35 mpg by 2020. The Bill also mandates the increased production of Ethanol to a total of 36 billion gallons per year by 2022 from the current 5 billion gallons of U.S. production. Of this, 21 billion gallons are to come from non-corn based ethanol. This might come from sugar cane, wood chips, algae and switch grass. This will require some technological breakthroughs since the production of ethanol from such sources as switch grass require the use of cellulosic enzymes whose economical production has not been perfected yet.
The original Energy Bill passed in the House by a margin of 235-181 had called for a national Renewable Portfolio Standard (RPS) that would require Investor Owned Utilities to produce 15% of their electricity from Renewable Sources by 2020. It also contained an extension of the tax credits for wind and solar through 2015 at a cost of $21 billion dollars. According to the pay as you go rules of the congress, this was to be paid for by increased taxes on fossil fuel energy industries such as oil, natural gas and coal. It is worth comparing the cost of this tax credit in relation to the daily costs of the war in Iraq and the interest expense on the U.S. government’s outstanding debt (I’ll leave this up to others). $21 billion dollars over 8 years is an insignificant expense to the federal government but would have a transformative effect on renewable energy in the United States.
Utilities in the Southeastern part of the country, especially utility Southern Co., strongly objected to the RPS. They claimed it would be much more difficult and expensive for them to reach this goal due to their lack of wind and solar resource. They argue that RPS legislation should be left up to the states. Currently, over 20 states have some sort of Renewable Portfolio Standard. New Jersey for example has a specific solar carve out for their state RPS requiring 2.2% of the electricity in the Garden State to come from solar by 2022 (roughly 1500MW). Renewable proponents argued that countries as far north as Germany,(the world leader in installed solar capacity at 60 degrees north latitude), are deriving increasing amounts of their electricity from solar. Therefore, it should be feasible for States that are lower than 40 degrees north latitude to produce significant amounts of solar energy (think the roof of every Wal-Mart, Target, Mall, New house). The Bill also contained a provision allowing utility companies to take advantage of the 30% Investment Tax Credit which they currently cannot avail themselves of.
The Energy Bill that passed the House came to the Senate Floor and came up for a vote of cloture. 60 votes were necessary. The vote was 59-40 in favor of cloture. John McCain was the lone abstention. Disappointing since solar is such an obvious choice for electricity production in his home state of Arizona. The vote went along party lines for the most part with notable exceptions of Republicans voting for cloture: Chuck Grassley (Iowa), Orrin Hatch (Utah), John Thune (S.D.), Norm Coleman (Minn.), Susan Collins (Maine) and Richard Lugar (Ind.). Democratic Senator Mary Landrieu of Louisiana, facing a tough reelection campaign next year in oil rich Louisiana, voted against cloture. The tax titles and RPS were stripped from the Bill and it passed the Senate easily. Even if cloture had been achieved, the President promised to Veto the Energy Bill that passed the House.
Senator Majority Leader Harry Reid and House Speaker Nancy Pelosi have vowed to bring up the PTC and ITC in the next session of congress. Without these extensions, both industries will most likely cease to install projects in the United States. Solar and Wind companies would focus on the government friendly areas of Europe and Asia. As it is, the uncertainty surrounding the extension of the credits has made it impossible for solar and wind companies to forecast and plan for projects past this year. This will inevitably lead to a slowdown in the domestic renewable energy industry. It should coincide well with the recession we are about to enter due to a reeling Real Estate market and historically high prices for Energy. The lack of foresight is appalling.
John Moran
johnflanaganmoran@gmail.com
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