The following article effectively highlights the influence very large utility companies can have on renewable energy projects and the need for predictable financial incentives that are sufficiently large enough and have a life long enough to allow projects to be planned and completed.
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Bend’s Big Solar Project Delayed, in Doubt
The Bulletin – James Sinks – August 5, 2008
A high-profile – and high-elevation – green energy project in downtown Bend may still be in trouble, despite a recent ruling by the Oregon Public Utility Commission that seemed to give the green light to privately financed solar projects on public property.
A 200-kilowatt solar energy array is supposed to be installed atop the city’s new downtown parking structure, where photovoltaic cells would perch on steel trellises above the top deck of cars.
Yet, because of the delay caused by the PUC case – which was launched by utility giant PacifiCorp, the parent company of Pacific Power – it is doubtful now that the project can be completed by December 31. That’s when a federal tax credit available for operational solar power projects is due to shrink from 30 percent of the installation cost to 10 percent.
And without that higher federal tax credit, the project doesn’t pencil out financially, said Doug Parsons, the chief executive of Bend-based SunEnergy Power Corp., which would install and own the solar array and then sell the electricity generated.
Even though the city of Bend helped to secure a $400,000 grant from Pacific Power to help pay for the parking garage project, there is no provision to force SunEnergy to actually build it, said Jeff Datwyler, the city’s downtown manager.
“It has always been at SunEnergy’s risk,” Datwyler said.
If installed, 60 percent of the power the solar array is expected to produce will be used for the parking garage.
The city would buy that electricity from SunEnergy – at a discount compared to regular power rates – and then would also get credits for the roughly 40 percent excess electricity that’s not needed from the solar array, and flows back onto the power grid, Datwyler said.
Similar projects in development across the state are teaming private investors and public entities, because private enterprise can benefit from tax credits that have been adopted to encourage renewable energy projects.
But executives at PacifiCorp, which is owned by Iowa-based MidAmerican Energy Holdings Co., raised questions about the legality of such deals, saying that small companies that are generating power and selling it from solar arrays should be treated as mini utilities.
PacifiCorp also questioned whether those companies should be able to take advantage of “net metering” and put power back onto the grid.
It took six weeks for the Public Utility Commission to evaluate that case and weigh testimony, in which only one of 18 entities that sent input agreed with the PacifiCorp position, said Jason Eisdorfer of the Citizens Utility Board of Oregon, and that was PacifiCorp.
The other public and private respondents said the public-private projects followed the state’s electric restructuring laws passed in 1999 and shouldn’t be in jeopardy. The commission agreed.
“After review, we find thses types of arrangements are consistent with existing laws and rules, but are also in keeping with the Legislature’s intent of encouraging development of renewable energy projects,” Commission Chairman Lee Beyer said in a release last week.
Eisdorfer said the decision won applause from consumer and renewable energy groups, and even Portland General Electric.
“It is good for customers to have options to generate electricity, good for the solar industry and this is a direction the industry was going, and it is good for the grid overall because it diversifies the system away from fossil fuels,” he said.
But eliminating regulatory uncertainty is only one hurdle to solar energy development. It is not cheap, so tax credits and rebates have become an important tool to make projects viable, said Susanne Leta Liou, senior policy advocate with the Renewable Northwest Project in Portland.
And the reduction in the federal credits – a bid failed last week to keep the tax benefit at 30 percent – looms even larger now, she said.
“Developers are under the gun to get projects completed by the end of the year, and it didn’t help matters that there was a delay caused by the PUC filing,” she said. She said she’s hopeful that the Bend garage project can get back on track.
So is SunEnergy CEO Parsons. The company remains committed to the project, he said.
It can cost upward of $7 per watt to install a large solar array, according to industry sources, meaning the 200-kilowatt project at the Bend parking structure could cost $1.4 million or more.
And that’s where the tax credits come into the mix. Those can allow investors to recoup half – or more – of the cost of installing a project, Liou said.
While the Bend private project appears to be in limbo, the same isn’t true for a solar array that will be installed atop the new terminal at Redmond airport.
That’s because the airport has received a grant to pay for the units, and will own it, and the project will be installed by December 31, said Airport Manager Carrie Novick.
