Tuesday, August 20, 2013

Sempra Buys a Bazillion Solar Panels...

Reader and friend Simon M. passes along this news about Sempra (our local electric utility) buying 1.1 million solar panels; there's more detail here.  Simon suspects lower prices and subsidies are at work.

Well, solar cell prices certainly have come down, rather dramatically.  And there are subsidies involved.  But incentives aren't what's driving this purchase: it's mandates.  Specifically, the California Renewable Portfolio Standard (RPS) – which, amongst other things, mandates that 33% of all energy supplied by power utilities come from renewable sources by the year 2020.  This is what's known to the bureaucracy as an “unconditional mandate”, which means exactly what it sounds like.  The utilities must provide that percentage of power via renewable sources regardless of the cost, regardless of the reliability, regardless of the impact on utility rates, regardless of any reason to use conventional power.  Sempra is reacting to that mandate.

A third of all power coming from renewable sources is an incredibly high fraction to achieve in such a short term, especially given that it takes up to 20 years to build new power plants in California (note that the Copper Mountain project is in Nevada!).  Some large organizations (can you say Google?) have given up on building solar power plants in California because of the lengthy and risky approval process.  As Sempra and other utilities noted at the time, this could only be achieved by spending huge amounts of money in capital investment – and that investment money is going to come from the rate-payers (that is, the folks like you and I who buy power from Sempra).  This need to finance capital is why the power from Sempra's all-PV Copper Mountain facility will cost significantly more than power from conventional plants.  Oh, and the rate-payers also get to pay for the costs of Sempra disentangling themselves from contractual commitments already made for future conventional plants, too.

This is one of the issues that's driving us out of California – in this case, a piece of regulatory madness that's guaranteed to drive up electricity costs, but not guaranteed to deliver any tangible benefit (all that political rhetoric notwithstanding)...

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