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Chasing the $un

Solar projects are becoming hot investments.

Fortnightly Magazine - March 2011

credit on renewable projects make utility ownership a better option. Further, the company also knew that with its balance sheet, it could greatly improve the chances that solar projects would be financed and developed.

“As a regulated utility we have the tax appetite, and we knew we could finance that type of solar asset efficiently,” Mahrer says. And owning a greater percentage of its renewable generation portfolio would also mitigate any potential risks associated with PPAs.

“For some utilities, the RPS mandate is still a key driver, but it’s no longer the only driver. The more progressive utilities are beginning to think about developing a portfolio of the future,” says Julia Hamm, president and CEO of the Solar Electric Power Association (SEPA). “While the price of a solar installation might be higher today, some utilities want to get their foot in the door and assess the business and technology issues now, rather than later.”

PV vs. Solar Thermal

Unregulated subsidiaries, like NRG Solar and San Diego-based Sempra Generation, on the other hand, are building larger-scale PV and CSP merchant projects specifically to serve regulated utilities looking to satisfy their RPS mandate. But like their regulated affiliates and peers, independent developers too are leveraging governmental supports, including DOE loan guarantees.

Sempra Generation, for example, is developing 1,000 MW of PV capacity in Arizona, Nevada and California. Its flagship project, the 48-MW Copper Mountain Solar facility in Boulder City, Nev., went commercial last December and is the largest operating PV plant in the country. The power from that plant, along with the company’s adjacent 10-MW PV El Dorado Solar plant, has been sold to Pacific Gas & Electric (PG&E) under separate 20-year contracts.

However, Sempra has much larger PV projects in development, including the 600-MW Mesquite project, located about 40 miles west of Phoenix, Ariz., and the 200-MW Rosamond PV project, located in the high desert about 90 miles north of Los Angeles.

“Renewable mandates are the driver. There is strong demand for renewable power in the Southwest region, and we see solar as a valuable part of that market,” says Sempra spokesman Scott Crider. “We chose PV over thermal technologies because, from a financing standpoint, it’s a more proven entity. There are also fewer moving parts, which we feel will reduce O&M costs, and no water is needed to operate the plant, which is an environmental benefit. Panel prices are declining as well. As more projects are built, the construction learning curve will also reduce costs.”

Construction on the first 150-MW phase of the Mesquite project is scheduled to begin later this year and should be completed by 2013. Sempra located the plant near the Hassayampa 500-kV switchyard, a major transmission hub that will enable it ship power to all southwestern U.S. markets. Power from the first phase will be sold to PG&E under a 20-year contract, pending approval from the California Public Utilities Commission.

Crider says changes to the federal tax laws are just as important to Sempra Generation as they are to IOUs. “The investment tax credit is absolutely a key