California Regulators Approve High-Priced PG&E-Abengoa Solar Contract
November 10 2011 - 8:50PM
Dow Jones News
California regulators on Thursday approved a high-priced
solar-power contract between PG&E Corp. (PCG) and Abengoa S.A.
(ABG.MC) over consumer advocates' objections.
Under the contract, PG&E's utility will buy electricity from
a solar-power plant for which Abengoa obtained a $1.2 billion
government loan guarantee.
Consumer advocates complained about the high price that PG&E
agreed to pay compared to other, lower-priced renewable energy
projects. But four of the five members of the California Public
Utilities Commission voted to approve the contract, saying that the
plant, called Mojave Solar, would be a reliable and unique source
of renewable energy.
"The technology is tried and true, the financing is all wrapped
up with the U.S. Department of Energy loan guarantee, and we're
told that the hard hats are on and the bulldozers are ready to
roll," said CPUC Commissioner Mark Ferron.
The decision comes as plunging prices for solar panels and an
oversupply of panels from China has put pressure on other renewable
energy technologies to cut prices. It also comes as the loan
guarantee program has come under heightened scrutiny following the
September bankruptcy of solar-panel maker Solyndra LLC, which
obtained $535 million in loan guarantees.
A second loan guarantee recipient, Beacon Power Corp. (BCON),
filed for bankruptcy in October after accepting a $43 billion loan
guarantee to build an energy-storage project in New York state.
The Division of Ratepayer Advocates, a consumer advocate housed
at the CPUC, objected to the high price of the Abengoa contract,
saying it wasn't competitive with other renewable energy projects
and would saddle customers with unreasonable costs.
Approving the project "is signaling to the market that
California will accept overpriced renewable energy, and that it is
willing to lock customers into higher rates for decades to come,"
said the division's director, Joe Como.
The price in the Abengoa contract was kept confidential,
although the CPUC said it is more than 11.6 cents a kilowatt-hour
and is among the highest prices PG&E has agreed to pay for
renewable energy.
The Mojave Solar project uses solar-thermal technology in which
curved mirrors mounted to the ground collect heat from the sun to
warm fluid into steam to drive power turbines. The Energy
Department finalized a $1.2 billion loan guarantee for the project
in September.
Four of nine California solar-thermal power plants that obtained
construction permits and power purchase contracts with utilities
have been abandoned this year. Solar Millennium AG (S2M.XE) turned
down a $2.1 billion federal loan guarantee for one of those plants,
saying difficult market conditions forced it to cancel the
project.
California utilities are required to use solar, wind or other
renewable power for one-third of the electricity they sell by 2020,
as part of the state's 2006 plan to combat climate change.
-By Cassandra Sweet, Dow Jones Newswires; 415-439-6468;
cassandra.sweet@dowjones.com
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