Yet again, the Los Angeles Times has published an attack on renewable energy masquerading as journalism. The front-page Friday article, "Taxpayers, Ratepayers Will Fund California Solar Plants," commits the journalistic faux pas of not even citing or quoting the "other side" in the debate about the true cost of solar power. More importantly, it gets the facts wrong. Very wrong.
I’ve contacted numerous people at the Times for a correction or a retraction because, frankly, I’m tired of the LA Times getting it so wrong on renewable energy issues. I’m not sure what is the source of such poor reporting, but regardless of the source there appears to be a consistent pattern. I urge readers to contact the Times to share their concern about accuracy and fairness in reporting. (Letters to the editor: email@example.com).
I wrote a response to the LA Times’ last really poor article on renewables in 2010, demonstrating how they mangled the conclusions of a public report about the likely cost of achieving the state’s 33% by 2020 renewable energy mandate. The article argued that it would cost $60 billion to achieve this goal. The actual figure, based on the report’s own analysis: $2 billion, off by a factor of 30.
The LA Times’ Latest Snafu
The latest snafu by the Times is almost as bad. Most egregiously, the article cites a Stanford economist for the conclusion that contracts for new large-scale solar projects are locked in at prices three to four times the market price of power: "But outside experts, including Wolak, the Stanford economist, estimate that Ivanpah power [a large solar project currently under construction] is priced at $90 to $130 per megawatt hour — three to four times the cost of electricity in the state last year."
This is a highly misleading apples to oranges comparison and Wolak should know better. Spot market power prices are indeed quite low at this point, but that is not the appropriate comparison. Spot market prices are by definition short-term, very different than the long-term market that includes solar power contracts.
Very few energy plants (renewable or conventional) are built to serve the spot market. The point of a long-term contract for power is that it's secure power and utilities enter into long-term contracts because they can then rely on that power for many years to come, as they are required to do by various state law and policies regarding long-term power procurement (see, for example, the Long-Term Power Procurement proceeding, R.12-03-014, at the CPUC). Long-term contracts are commonly entered into for conventional generation as well as renewable energy.
The bottom line is that the contracts that the LA Times’ article derides as “three to four times” the price of market power are in fact at or below the long-term market price of electricity from status quo natural gas power plants. The state's Market Price Referent (MPR) structure is the former methodology for determining whether renewable energy contracts are cost-effective or not, and it applies to the BrightSource Ivanpah contract because that contract was entered into under this methodology. The MPR is the calculated cost of power from a new 500-MW natural gas plant. The 2012 MPR for a 25-year contract is 9.274 c/kWh, down about 15% from the last (2009) MPR table due to declining natural gas prices.
The exact pricing for BrightSource and other long-term renewable energy contracts is not public and this figure should be public - that much I agree with in the LA Times article. However, the CPUC, at the behest of the utilities and ratepayer advocacy groups like the Division of Ratepayer Advocates (DRA) and TURN, insist that contract prices be secret for three years in order to avoid having project developers simply bid values around known prices rather than the lowest prices they can bid and still have a viable project. I disagree with this conclusion, but it is the rule at this point.
Even though the exact prices are confidential, the approved contracts include a statement as to whether the contract is above or below the MPR. BrightSource's contract as approved by the CPUC would not exceed the MPR, and is thus, by definition, cost-effective.
The 2009 CPUC resolution approving the PPA states: "Based on expected online dates of 2012 and 2013 for 25-year contracts, the expected levelized price for the projects do not exceed the 2008 MPR. The MPR is used by the Commission to evaluate the reasonableness of prices of long-term PPAs for RPS-eligible generation." I explain the term “levelized” below.
The MPR value used to determine cost-effectiveness for the BrightSource contract is higher than today's MPR values because the price of natural gas has come down so much. However, hindsight is 20/20 and there was no way in 2008 to know that natural gas prices would come down so considerably - as opposed to the vertiginous rise we’d seen up until 2008 (remember that oil hit record highs of $147 a barrel and natural gas over $13 in 2008?). This is the nature of the beast in long-term contracting and critics who complain about how prices are so much lower today than in 2008 are being disingenuous or don't know the facts about the background of long-term contracting.
So the LA Times’ article’s primary critique of the BrightSource project and solar power more generally is entirely wrong.
The article also paints with an overly broad brush in criticizing the BrightSource project. I'm not a big fan of large-scale desert-based solar projects (and, for the record, I have no financial interest in or connection to the BrightSource or other large-scale solar projects) and the transmission required to bring them online. I'm a proponent of "community scale" solar projects that don't require new transmission lines and can be located close to load (also known as "wholesale distributed generation"). However, the criticisms the article levels against BrightSource will surely bleed over onto solar in general - and entirely unjustifiably.