How Californians are Getting Cheap Renewable Energy

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image via BrightSource

How often we hear of a nuclear plant or a coal plant having been delayed, and with cost overruns, for which the ratepayer must foot the bill. But those projects plow on, costing more and taking longer, as more things go wrong.

By contrast, we are not hearing about cost overruns on renewable energy contracts. Why is that?

I discovered the answer in reading through this excel file of all the renewable energy contracts signed with the big three California utilities.

I had separated out just the ones over 100 MW (there’s 110) and noticed that 18 have been canceled, and that of the 18 that were canceled, they first had delays. Some were having trouble getting transmission. And though some of those that got delayed have come online since, or have a delivery date that is pushed back a few months to a year, of all of the contracts that have been canceled, the projects were first delayed.

It almost appeared that if there is a delaying problem (delays usually raise costs) renewable projects simply get canceled.

Do California Power Purchase Contracts (PPAs) give the utilities an out if there are delays, and that is why these 18 delayed projects got canceled?

I asked PG&E communications guru, Lynsey Paulo, if this was the case.

“In general, yes,” said Paulo.  “Our Form PPA contains provisions that allow for PPA termination when the developer does not meet project milestones in a timely fashion.   This would include, for example, failure to meet Guaranteed Construction Start Dates for certain reasons or failure to meet Guaranteed Commercial Operation Dates for certain reasons. ”

Of the two largest projects, one was canceled. Solar One’s 850 MW Stirling Engine was initially delayed and then canceled. It used an unusual technology;  a rotating single axis tracker dish technology with a lot of moving parts, yet according to this file, still priced under MPR.

The MPR is the predicted annual average cost of production for a combined-cycle natural gas fired baseload proxy plant. That must have been difficult, coming up with a unique technology, yet selling the power cheaper than from a natural gas plant which can be mass-produced. It also had trouble getting transmission – as well as losing a court battle with an Indian group at the time that SCE canceled their contract.

But huge projects selling below MPR, and not having delays can be done. The 1,000 MW BrightSource project is listed as five 200 MW projects, that come on line one after the other, and these have not been delayed, despite their desert tortoise issues that the company has resolved. The first 200 MW is on track to be shipping to the California grid by mid 2014 at below average prices, with the last one to start shipping electricity by mid 2017.

All the BrightSource solar projects are selling their power to California utilities at below the MPR, or Market Price Referent.

Depending on how long the contract is for, and how valuable the power peak production is, and how soon it is signed, the MPR, or what a gas plant sells at, ranges from 7 cents to 12 cents a kilowatt-hour.

So, at below MPR, BrightSource solar thermal will cost Californians less than natural gas.

For the new renewables industry, dropping just 18 out of 110 very large utility-scale projects between 100 MW and 1,000 MW, in a recession, that is a pretty decent batting average. All of the wind projects, and some of the solar projects, selling in many cases for less than the power from an old established technology like natural gas power is a real achievement.

California’s renewable energy power contracts protect the consumer from cost over-runs.

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