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Published on November 13th, 2011 | by Andrew

24

The NY Times’ Shoddy, Slanted Reporting of NRG’s California Valley Solar Ranch, Clean Energy Stimulus & Subsidies



Image courtesy of SunPower

The NY Times published an article yesterday entitled “A Gold Rush of Subsidies in Clean Energy Search,” that essentially boiled down to criticizing government subsidies fostering development of clean and renewable energy.

The NY Times‘ reporters singled out NRG Energy’s 250 megawatt (MW) California Valley Solar Ranch project in San Luis Obispo, opining that it was typical of “the banquet of government subsidies available to the owners of a renewable energy plant.” As it turns out, if NRG’s solar power project is indeed typical, then the US public should be in pretty good shape.

I can certainly support the Times and its reporters’ efforts to act as watchdogs of large, poltiically well-connected corporations feeding off the public trough without having any “skin in the game.” There always seems to be, and have been, plenty of that, most of it never covered by the press.

Unfortunately, the NY Times‘ reporters get so much of crucial substance wrong in this article that you have to wonder if political and economic bias rather than incompetence is to blame.

The article is so full of holes that it prompted NRG to issue a claim-by-claim rebuttal.

The NY Times Claims vs. The Actual Facts

I’ll just highlight several of the key falsehoods and misrepresentations included in the NY Times piece that NRG corrects in its rebuttal. Those interested will find hyperlinks to the original NY Times article and NRG press release above.

What the NY Times wrote:

“When construction is complete, NRG is eligible to receive a $430 million check from the Treasury Department — part of a change made in 2009 that allows clean‐energy projects to receive 30 percent of their cost as a cash grant upfront instead of taking other tax breaks gradually over several years.”

The Actual Facts from NRG:

“$380 million will go to repay the DOE loan and the American taxpayer, and only $50 million flows to NRG as the equity investor in the project.”

What the NY Times wrote:

[Lawrence H. Summers warned of] “’double dipping’ [of government incentives]
that was starting to take place. They said investors had little ‘skin in the game.’”

The Actual Facts from NRG:

The Government protected itself against this concern by ensuring that most of the money from the treasury grant received by the project has to be used to pay down the DOE loan. On the CVSR project, almost 90% of the proceeds from the cash grant will go to pay down the DOE loan.

What the NY Times wrote:

“PG&E, and ultimately its electric customers, will pay NRG $150 to $180 a
megawatt‐hour, according to a person familiar with the project, who asked not to be identified because the price information was confidential.”

The Actual Facts from NRG:

“The exact price is confidential, but the number quoted is significantly higher than the actual power price in the CVSR agreement. It is overstated in the article by a significant amount.”

The Ugly, Protracted Decline of Mainstream News Organizations

It may come as a surprise to some how such a highly esteemed and reputable news organization as the NY Times could publish a piece so full of misstatements and errors. Unfortunately, it seems to be more commonplace than is healthy for journalism or society.

Moreover, it’s symptomatic of mainstream media organizations that have largely squandered their credibility, along with billions of dollars and who knows how many decent jobs, to fulfill the dreams of media moguls looking to build global media empires, or at least ensure their survival by “selling out” to corporate interests at the expense of the public interest. One only has to watch any of the “business news” channels to see how transparent all this has become.

Not only that, but these moguls and entrenched managements have been abominable strategic business managers. They may be super-rich, they may be shrewd and intelligent, but astute business managers and capitalists they are not, excepting of course when it came to lining their own pockets and those of greatest use to them. They were largely blindsided by the rise of the Internet and too slow to catch on to the ramifications of digital communications technology on their businesses.

Instead, they were intent on building monopolies, or at least a good chunk of an oligopoly, and took on huge amounts of debt to do so — all with the tacit approval of their shareholders. Now, we look about and see a rubble heap of failed or “walking wounded” news organizations instead of organizations aspiring to live up to the ideal of their functioning as a critical check-and-balance on the abuses of power and wealth and a pillar of a just, open, democratic society.

For more on the media, politics, renewable energy and clean tech reporting, see:

- Amory Lovins Nails Renewable Energy Costs, Energy Subsidies, & Myth of Baseload

- How to Buy a Congressman

- Take Action: Tell Congress to Continue Critical Clean Energy Policies

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About the Author

I've been reporting and writing on a wide range of topics at the nexus of economics, technology, ecology/environment and society for some five years now. Whether in Asia-Pacific, Europe, the Americas, Africa or the Middle East, issues related to these broad topical areas pose tremendous opportunities, as well as challenges, and define the quality of our lives, as well as our relationship to the natural environment.



  • Pingback: Bigger Subsidies Make Bigger Solar a Bad Bet

  • http://pulse.yahoo.com/_HPYM3MYDOZE5QUVPAYWIPNUMRM arttow

    Did you folks just swallow NRG’s talking points whole? Where is the journalism here? The DOE provided a loan guarantee not the dollars. The grant money may go to repay the debt but it isn’t going to Uncle Sam.

    This project should have never received a loan guarantee. There is nothing innovative about single axis tracking or weather feedback to the trackers.

    Power Purchase Agreements executed in this time period received the prices quoted in the NY Time article. Is NRG’s definition of “significantly” 2% or 20%. Either way it is high priced power. On peak pricing in July 2011 were in the high $30′s or low $40′s. One third of the price paid in the PPA

    Unusually it appears the NY Times got this one right

    • Akbweb2

      Thanks. You’re right about the loan guarantee; it’s a guarantee, not actually public but private capital in the loan…

      This doesn’t change the misrepresentation in the NYT article, however. In fact, it reinforces it. It boils down to the Treasury 1603 cash grant in lieu of tax credits…and the up-front cash is dedicated to repaying the debt, which is guaranteed by the government, thereby assuring protection of the gov’t as guarantor…

      The time period is key. Yes, prices quoted then can seem high now; but prices have come down a lot in the interim….Perhaps the parties involved could or would include provisions for price adjustments over the project construction time period…

      Are DOE loan guarantees limited to ‘innovative’ technology and projects?

    • Akbweb2

      “Where is the journalism here?” I’ll tell you, my friend: it’s in this article, its sources and in these comments..Thx for contributing.

      NRG is the primary source here. Their public statement in rebuttal has to be taken as the facts, at least unless it’s shown they lied, which I would deem highly unlikely in this case.

      In contrast to the NYT piece, there is no misrepresentation, or critical omission, of facts here.

      NRG does come out and openly state that the terms of the PPA are being kept confidential, claiming that the NYT significantly overstated the price. That’s a critical omission of fact, but one that they at least acknowledged openly…

      NRG counters the NYT’s assertions, which are based on a what apparently is a poor financial analysis done by Booz, Allen.

      Was Booz, Allen paid by the NYT to do the analysis? Or did they ‘volunteer’ it? Good questions that go to the heart of key issues related to good journalism…

      Based on this, the NYT and/or Booz, Allen then omits critical information that would provide an accurate, much more complete representation of the project’s financing, slanting it in an editorial manner that apparently suits the paper’s editorial opinion…

      I’d say that your comment, “Where is the journalism?” is clearly misdirected. You should be asking what kind of journalism the NYT is pursuing in reporting and publishing pieces like this.

      If they justifiably want to raise questions about the pricing of PPAs and federal support, they have to at least strive to do so in an accurate and comprehensive manner based on as much accurate information as they are able to gather…

      Labeling such pieces as ‘editorials’ would go a long way towards meeting a journalistic standard, as well, but it wouldn’t change the gross inaccuracies and misrepresentation in any event.

  • Krm388

    Also puzzling how it could ‘cost’ $6,400/kW–especially at that scale–when panel mfg cost is down to $740.

    • Akbweb2

      Where did this number come from?

  • Krm388

    As NRG’s chief executive, David W. Crane, put it to Wall Street analysts early this year, the government’s largess was a once-in-a-generation opportunity, and “we intend to do as much of this business as we can get our hands on.” NRG, along with partners, ultimately secured $5.2 billion in federal loan guarantees plus hundreds of millions in other subsidies for four large solar projects.

    “I have never seen anything that I have had to do in my 20 years in the power industry that involved less risk than these projects,” he said in a recent interview. “It is just filling the desert with panels.”

    • kknuck

      his article yesterday is a 180…can you give a link to those comments please?

    • Akbweb2

      Can this even begin to make up for what, 50 years of fossil fuel subsidies? and an almost total lack of alternative, renewable energy development support during all those years?

  • TaxDaddy

    NRG’s responses on the fact sheet are pretty accurate. What everyone forgets is they are taking a fair amount of risk with these projects, and are putting up substantial capital for these projects. They deserve to be compensated.

    What is surprising is, that per the article, NYT used financial analysis from Chris Dann at Booz Allen to justify their conclusions. The analysis has obvious flaws and any first year financial analyst could have corrected in 15 minutes. This leads me to conclude that the article intended to embarrass the government with outlandish comments based on flawed math.

  • kknuck

    I found this article under google news…several hours later…it disappeared…I’ve noticed this a lot lately…something or someone is dictating and manipulating what is the “headline” news…scary..

    • Anonymous

      Google News is based 100% on algorithms. The stories do change frequently. Sometimes they last awhile, but often the top links cycle in and out rather quickly — depends on who else is writing on the topic, how popular the topic is, who is linking to the stories, and I’m sure much more.

      • kknuck

        Thanks…is that true for yhoo as well? I noticed several articles re pwer disappear…

        Another hit piece today…this time from ticonderoga…it may be the seasonally slowest part of the year, but many companies in many countries (different weather patterns) are rushing to beat incentive deadlines…I wouldn’t short solar companies now…too much risk for too little reward.

  • Susan Kraemer

    I was dismayed by the Times’ reporting bias in that too. It made it sound like clean energy companies are run by shysters. Very nasty hit job. And why?

    The fact is that every penny invested in renewable energy benefits the public good.

    And renewable investment is long overdue. The US government invested in coal in the 1700′s, in oil in the 1800′s and 1900′s and nuclear since 1950. They all had 50 years or more of investment, and still get more subsidies.

    Lets hold off on criticizing the Obama administration clean energy investment till we have a level playing field with the other forms of energy we subsidized.

    The day will come when all of us appreciate all the clean power this administration left behind, just like the last time the US invested in clean energy, during the Carter administration… and we’ll wonder why it ended. Hit jobs like this to dumb down voters is why.

    • kknuck

      for some time now, the media has been writing “hit-pieces” against solar and other next generation energy suppliers…wall st is betting big against these companies and this industry…I think if you connect the dots, it is obvious what is going on…media has become a sham…er..shame…politics aside…it really is about our world…what is best…? certainly not the existing energy providers…

  • Dewaynecurry

    You are kidding me right.
    I didn’t read the NYT article but what you put up there supposedly in defense of NRG hardly succeeds.
    You admit that they get 430 million dollars for free, except they got 380 million earlier as a loan that they got more free money to pay back. That is still 380 million free. Oh and they get to keep an extra $50 mill for whatever they want.
    And your last point.. hilarious. They promise really really that its not $150+ per MWH. Just trust us they say because we cannot tell you the real number.
    “It may come as a surprise to some how such a highly esteemed and reputable news organization as the NY Times could publish a piece so full of misstatements and errors.”
    You did not prove any misstatement or error. Please retake logic course from college.
    Apparently you have an ax to grind. I for one agree that big media sucks and cannot be trusted. You completely failed to call them on any actual facts on this one though.

    • Akbweb2

      I believe NRG’s rebuttal points out the seriously mistaken information put forth in the NYT article. I can only suggest you re-read and re-consider them.

      They get $450 million to actually build a working 250 MW solar power farm that will supply clean, renewable electricity for thousands, as well as generating good jobs.

      The $380 million that will go to repaying a DOE loan, thereby paying back, with interest, the money borrowed from the public, is 30% of the project cost in an up-front cash grant taken in lieu of an investment tax credit.

      This apparently is the Treasury 1603 grant program, so instead of taking investment tax credits over several years, they receive 30% up-front in cash rather than recouping it over several years in the form of investment tax credits.

      They “keep” the $50 million as a return on the equity capital they invest. Nothing free there. They have to deliver the project to collect.

      True enough, the price is kept confidential, so we have to take it on faith that NRG’s claim that the price quoted in the article is significantly overstated is true, at least until it can be verified or disproved.

      So what’s happening net-net? The government essentially funds the building of a 250 MW solar power plant with public money. 90% of the up-front cash grant, which would have produced tax savings in any case, goes to repay part of the DOE loan,which will be repaid in full with interest.

      Do I have my “logic” straight?

      • Susan Kraemer

        Exactly.

      • Anonymous

        NRG is going to spend about $1600 million, not $450M. They’re borrowing $1200M of that from the federal government. When they get the $430M grant upon completion, whether they’ll decide that the best use of the money is to immediately pay off part of a low-interest-rate loan remains to be seen. But maybe that’s in the terms of the loan.

        The price in the PPA may be confidential, but we know enough to figure the cost. Plug the interest rate (3.5%), the cost ($1600M/250MW = $6400/kW), a capacity factor (~25%), and the fuel cost ($0) into
        http://www.nrel.gov/analysis/tech_lcoe.html
        and see what you get. However, NRG may be correct that PG&E’s ratepayers will pay less than 15¢/kW-h (=$150/MW-h), with the balance being paid by California and US taxpayers, through the various subsidies such as the 1603 program. Which was kinda the point of the NYTimes’ article.

        • Akbweb2

          The point is that the NYT materially misrepresented and got the workings of the financing wrong.

          Yes, the $430 million is 30% of the project cost, as per the rules re investment tax credit.

          Apparently, there’s a stipulation that 90% of the cash grant has to go to repaying the DOE loan, so they do not have a choice there.

          An investment tax credit, which is what the Treasury 1603 grant accelerates in the form of an up-front cash payment, is actually tax money that companies avoid paying, not money given to them by the government. By taking the cash grant up-front, NRG’s uses up the tax credit and pays taxes going forward.

          Thx for the link to the NREL calculator.

          Gov’t subsidization of energy plants is nothing new and with power in particular being so regulated is actually the rule rather than the exception.

          I’d rather public money go into renewable, clean energy plants than others…

        • Akbweb2

          ‘kinda the point’ of the NYT article, supported by faulty premises…which leads to faulty conclusions.

        • http://pulse.yahoo.com/_HPYM3MYDOZE5QUVPAYWIPNUMRM arttow

          Is the the former Calpine guy Bill? Anyway thanks for reminding me the capital cost is way too high. Even if NRG didn’t add a dime of equity, the loan guarantee amount is nearly $5.00 per watt. This number has is way too high for a crystalline single axis tracking project.

        • Akbweb2

          Yes, the gov’t is subsidizing solar energy to make it competitive with conventional sources for the time being…

          That’s a good thing IMHO.

          And they’re protecting PG&E’s customers by spreading out the cost through federal the federal subsidies…

          This has been the way of things in large, organized societies since they were created…How it’s done and to what end are key criteria…

          The taxpayer, and buyers of US debt, have been subsidizing fossil fuels for more than 50 years. What about that ‘point’?

          What about the huge environmental costs that have resulted from fossil fuel extraction, production and use? Who pays for those? Not the companies involved in the business, the public, the taxpayer, etc. to a very large extent.

          What about other costs, such as the cost of wars and military presence and operations in foreign oil-producing countries, which has been a primary driver of US foreign policy for 50+ years?

          In contrast, CVSR is domestically, locally produced and consumed clean, renewable electricity.

          PG&E’s customers and people throughout the local areas, region, state, country and world will benefit over the long-term by adopting clean, renewable energy sources.

          Indeed, by reading the article more carefully, you would find out that NRG clearly states that 90% of the cash grant for the CVSR project will go to repay the loan, thereby protecting and assuring that the DOE will not have to cover this conditional liability.

  • kknuck

    Exactly to the point. Main-stream journalism has become ludicrous. Simply mouth-pieces for paying customers. Sad. Journalism was a big part of our checks & balances.

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