At Long Last: Green Light for Solana
It has been talked about for almost 3 years, ever since it was first announced in early 2008. I’ve even been asked by friends, who know I work with utility company investors, how construction of the solar plant near Gila Bend has been going.
It hasn’t been going at all.
Thanks mainly to the virtual collapse of financial markets in late 2008, Abengoa Solar, Inc., the Spanish company building the plant, has not closed on financing to get the project underway. Consequently, construction of the plant has been in a state of suspension.
Well, with this week’s announcement by U.S. Energy Secretary Steven Chu, that the $1.45 billion loan guarantee by the federal government has been finalized, it looks like construction can commence tout de suite.
This is great news for Arizona and APS. First, it means the addition of some 1,600 construction jobs soon and 70 permanent jobs once the plant is operational. Additional “indirect” jobs will be created in other sectors, like manufacturing to produce the materials and equipment for the plant, and service jobs to support both construction and permanent workers. For Arizona’s beleaguered construction sector, the announcement will draw workers back to Arizona from places less affected by the bursting of the housing bubble. Since 2007, Arizona’s construction industry has lost over 100 thousand jobs. While the relatively small number of new, direct permanent jobs created by project, which will occupy a land area of 9 square miles, is somewhat disappointing – a job is a job, and that’s good.
And, for APS, which will purchase the power from the plant, it provides 250 megawatts of power from clean, renewable energy sources to assist in meeting the Corporation Commission’s renewable mandate of 15 percent by 2025. The power generated by Solana can serve 70,000 homes. A unique feature of Solana is that it will be the first U.S. central solar plant with the ability to store energy using molten salt technology. This means that APS will be able to deliver power from Solana when the sun is down – an important consideration in meeting summer peak load periods.
On a cautionary note – solar power is more expensive than power produced from conventional plants, like gas, coal or nuclear. The estimates for Solana power that I’ve seen published are in the neighborhood of 14 cents per kwh, versus a system average of about 10 cents. Proponents of solar energy will tell you that solar power, unlike power from gas or coal, does not contribute to greenhouse gases. Placing a price on greenhouse gas emissions would, they argue, place solar power on a more equitable footing with conventional sources.
So, there’s clearly a tradeoff – cleaner power technologies require higher electricity prices for consumers. How much are we as a society willing to pay for clean energy -- $5 per month? $50 per month? more? nothing?
This is a question regulatory commissions like the Arizona Corporation Commission face. The imposition of renewable mandates and energy efficiency mandates on companies has a price impact. The ACC’s job is to find the “sweet spot” that keeps the utility companies financially healthy and viable (so they can attract necessary investment capital to serve customers), while protecting the interests of ratepayers. When you add environmental mandates, rate setting at the ACC raises this high-wire balancing act to new heights.
