PRC Commissioner Jason Marks, August 2, 2010
The contract for New Mexico’s largest planned solar energy plant, a 92 MW solar thermal plant that was to be built by eSolar to serve customers in Las Cruces, was cancelled recently. This is a very disappointing development on several fronts. First of all, 92 MW would have been large enough to supply the electricity needs of around 35,000 customers, and is likely significantly more solar energy than the sponsoring utility, El Paso Electric Company, is likely to propose to acquire through alternative projects.
Just as important as scale, however, is the technology. Solar thermal generating technology uses mirrors to collect heat from the sun and turn it into steam that can spin a turbine. Utility scale solar thermal plants were first deployed in the Mojave desert in the 1980s and those plants still produce power with around 98% reliability. Several solar thermal plants have been built in Europe in the last decade, a 64 MW solar thermal plant went online in Nevada in 2007 and numerous other projects are in the works. The most attractive thing about solar thermal technology (aka concentrating solar power or CSP) is that plants can incorporate cost-effective energy storage. Solar energy can be stored in the form of heat using a suitable mass like a reservoir of molten salt before being converted into electricity. Such storage is orders of magnitude less costly in terms of both equipment costs and conversion losses than batteries and other technologies being discussed as possible storage solutions for intermittent renewable sources like wind and solar PV. The Andosol 1 plant that recently went online in Spain includes 7.5 hours of thermal storage capability.
Until recently, solar thermal also had cost advantages over the more familiar solar photovoltaic (PV) technology. But recent engineering and manufacturing advances, combined with an over-supplied market, have pushed PV into the 10 to 13 cent per kwh range for larger installations, a decline of almost 50% in less than years. Solar thermal prices are in the range of 13 to 17 cents; the cancelled eSolar contract was for 13 cents. (All prices are after federal tax incentives.) It’s great that PV is getting cheaper and moving towards “grid parity” (the price of retail electricity), and it’s also great that individual customers can take control of their electricity supply and go green with their own rooftop systems. I have supported the policies that have paved the way for much greater use of customer-owned PV.
We cannot achieve a 100% renewable-based electricity supply in our region or even 50% with only wind and solar PV; i.e., without solar thermal. PV is superior to wind, in that solar intensity is more naturally coincident with our peak demands for electricity on hot summer days, however when solar peak is around noon and our load peak is late afternoon/early evening, at least four hours of storage is really needed in order to begin replacing fossil fuel power with solar. Experts believe that the only plausible model for transitioning to a largely renewable based electricity supply in the Southwest using currently known technology relies on solar thermal with overnight storage. Even putting aside the storage question, the intermittency and spikiness of power delivery with wind and PV create a technical limitation on how much of these resources can be managed or integrated into the electric grid, and this maximum is likely somewhere between 30% - 40%. (Output from PV panels drops instantaneously when shaded by a cloud.) Biomass and geothermal, renewable energy sources that not intermittent, are not available in sufficient quantities to support a major portion of our electricity demand.
While the eSolar plant that was cancelled did not include extended ancillary storage, it was expected to have 15 to 30 minutes of thermal latency from heat carried in its transfer fluid. This would have substantially smoothed the ramps up and down with cloud cover and made it a much more useful resource on the utility’s system than the same quantity of solar PV. Fifteen years from now, when we’re pushing to get to an electricity supply that’s mostly renewable, this would be a plant that we would have been very glad to have in the ground and operating already.
What happened with the eSolar plant? eSolar sold several of their utility power purchase agreement to NRG Energy, a large N.J.-based company that develops wind and solar projects and also operates a fleet of nuclear plants back east. NRG decided that the profit on the New Mexico solar thermal plant would not be high enough unless it got a federal loan guarantee under the stimulus act. The project was turned down for a guarantee in the first round of DOE approvals, but was invited to reapply. NRG’s contract with El Paso Electric (EPE) was not contingent on a federal loan guarantee being grant nor any other financing issues; i.e., NRG was contractually obligated to build the plant regardless. However, NRG indicated it intended to breach the contract and instead proposed to EPE that it do a substitute 20 MW PV project on the same site, at the same price, 13 cents/kwh.
At my request, the PRC held a hearing on the pending cancellation in June. It was learned that EPE had separately solicited bids for substitute PV projects and was planning on pursuing negotiations with a supplier who had bid 10.3 cents. Neither NRG nor EPE showed any enthusiasm for keeping the original thermal project alive while a new application a loan guarantees was pursued. Renewable energy advocacy groups elected not to intervene in the case and speak up for a plant that was important to New Mexico’s renewable energy future. PRC staff and the only intervener, a small Albuquerque-based solar company, urged the Commission to take no action and let things get worked out in EPE’s annual renewable energy procurement case that was to start up in July. Over my objections, the Commission disregarded this advice and entered an order killing the solar thermal plant and approving the substitute PV contract with NRG. In essence, NRG was rewarded for breaching its solar thermal contract by being given a new contract without having to go through the competitive bidding process or even beat the price of the winning bidder.
In a strongly worded dissent, I pointed out that the Commission majority had violated basic principles of regulatory law by ruling on an issue that had not been noticed for hearing (approval of the substitute contract) and had actually approved a contract that was never even introduced into the evidentiary record.