Solar Energy Stalls
Five years after the Obama administration's renewable energy initiative touched off a building boom of large-scale solar power plants across the desert Southwest, the pace of development has slowed to a crawl, with a number of companies going out of business and major projects canceled for lack of financing.
Of the 365 federal solar applications since 2009, just 20 plants are on track to be built. Only three large-scale solar facilities have gone online, two in California and one in Nevada. The first auction of public land for solar developers, an event once highly anticipated by federal planners, failed to draw a single bid last fall.
Several factors are responsible, industry analysts say. The tight economy has made financing difficult to obtain, and the federal government has not said whether it will continue to offer tax credits of the size that brought a rush of interest in large-scale solar five years ago.
"I would say we are in an assessment period," said Amit Ronen, director of the George Washington University Solar Institute.
"Nobody's going to break ground on any big new solar projects right now _ utilities want to see how farms coming online this year fit into the grid, and developers are waiting for more certainty about state policies and federal tax credits."
Another, somewhat unexpected issue is the difficulty solar developers are having negotiating agreements to sell their power to large utilities. The agreements reached to date guarantee solar providers higher rates than utilities pay for power from traditional energy sources.
Utilities had been willing pay more because many states, including California, require them to derive a significant percentage of their power from renewable energy sources. But now utilities in many states are on track to meet those requirements, giving them less incentive to buy higher-priced solar energy _ especially as a steep decline in natural gas prices has cut the cost of power from gas-fired generators.
In California, utilities are saying they have enough projects under contract to meet the state's 33 percent standard for power from renewable sources, said Jerry R. Bloom, chairman of the energy practice at Winstong and Strawn, an L.A.-based firm that arranges financing for large renewable energy projects.
"Until you know that you are going to build the plant and be able to sell the power, no one is going to get money to build," Bloom said. "No bank would fund it."
The slowdown is sobering for a high-flying industry that a few years ago attracted investments from Goldman Sachs, Google and energy giants BP and Shell. Generous federal and state incentives and federally guaranteed loans provided investor returns of 15 percent to 20 percent, said Ed Sappin, chief executive of the New York-based Sappin Global Strategies, which advises renewable energy developers.
But those days are gone. "It's not as attractive to private equity players now," he said.
Sappin called the investment tax credit the cornerstone of modern solar development, one of a list of government subsidies long available to the fossil fuel industry.
That credit is scheduled to drop from 30 percent to 10 percent at the end of 2016. Congress could elect to extend the larger tax break, but with continued uncertainty, new solar projects are unlikely in the near future, Sappin said. "If I'm a developer looking at new projects, the latest I would consider entering any new utility projects would be at the end of this year," he said. Some power from the three new operating plants has hit the grid, but as of 2012, solar's contribution to the total national power supply was less than one-half of 1 percent.
The scrutiny of big solar has been unrelenting, with every hiccup parsed for insight into solar market trends. In California the industry has weathered projects that have been put on hold (Blythe Solar), withdrawn (Rio Mesa), suspended (Hidden Hills) or failed outright (Carrizo, Calico, Beacon Solar and Imperial Valley Solar). Some moribund projects have been the victim of the delays and cumbersome requirements involved with siting massive power plants on public lands and dealing with environmental and cultural sensitivities.
Even so, solar backers see progress. "Considering that we did almost nothing in the way of large-scale solar for almost 20 years, this represents a substantial step forward," said V. John White, executive director of the Sacramento-based Center for Energy Efficiency and Renewable Technologies.
White is optimistic that projects that have signed power purchase agreements will be built.
In contrast to large-scale projects, mid-sized and rooftop solar power is burgeoning and eventually could curtail demand for major solar plants, analysts say. With businesses and homeowners increasingly generating solar power on their premises, the so-called distributed generation model could usurp the need for larger players.
"It's pretty simple," said Bloom of Winstong and Strawn. "If they aren't getting power purchase agreements from utilities to build utility-scale solar, you are going to shift to distributed generation. It's going to be the next wave."
(c)2014 Los Angeles Times
Join the Discussion
After you comment, click Post. You can enter an anonymous Display Name or connect to a social profile.
LATEST INFRASTRUCTURE & ENVIRONMENT HEADLINES
Just Green Enough44 minutes ago
How Does Your City’s Streetcar Compare to Others?44 minutes ago
Why Car-Free Cities Aren’t Right Around the Corner44 minutes ago
The Downsides of a Neighborhood 'Turnaround'44 minutes ago
Pennsylvania's New Governor Reinstates Fracking Ban in State Parkland1 day ago
Senate Approves Keystone Pipeline Despite Veto Threat1 day ago