Hydropower, Solar, Utility Scale

To Put Solar Power on Federal Land, or Not

On December 21, 2009, Senator Dianne Feinstein of California introduced legislation that aims to prevent building massive solar power plants on certain federal lands. The news was not received well by the solar industry, but there remains reason for optimism. After several years of processing solar right-of-way applications with no results, we expect the Bureau of Land Management (BLM) to issue its first ever approval in 2010. Conservationists concerned about wildlife including the desert tortoise have successfully delayed the BLM’s progress to date, but pressure from the White House and funding from Congress may finally break the logjam. We look for the battle between solar developers and conservationists to rage in 2010, and provide insight as to whether the US government intends to put gigawatts of solar power on its property, or not.

The federal land in question is arguably the best location for solar power in the world.  It totals roughly a million acres in six southwest states where sunhours are the highest in the United States and superior to almost any location in Europe. Plus, the nearby California utilities are eager to buy the electricity because of an aggressive state Renewable Portfolio Standard (RPS). Using leading photovoltaic or concentrated solar technologies, an Independent Power Producer (IPP) can generate electricity at less than 15 cents per kilowatt hour and earn a double digit internal rate of return.

The BLM has been accepting applications from solar developers because the Energy Policy Act of 2005 mandates the approval of 10 GW of non-hydropower renewable energy projects on public land by 2015.  Ideal conditions for solar attracted a flood of developers; the agency has accepted 220 applications that total well over 100 GW of generating capacity, or more than 10% of the nation’s current generation capacity.  Unfortunately, the resources necessary to process the applications were not fully allocated until 2009. The process was slowed down further because issuing a right-of-way permit qualifies as a major federal action that triggers the National Environmental Policy Act (NEPA).

NEPA requires federal agencies to consider the environmental consequences of “major federal actions.”  Solar power plants that affect thousands of acres of undisturbed land are likely to trigger the most stringent level of NEPA review: an Environmental Impact Study (EIS) lasting between 1 and 3 years.  NEPA, combined with state-level regulations, offers conservationists an opportunity to slow down or cancel projects.  Not one utility-scale solar power plant has completed an EIS.  We expect this to change in 2010 though, with a 400-MW project in California poised for completion.  Still, the BLM is likely to fall well short of its goal to approve 13 “fast-tracked” projects totaling 4.6 GW this year.

While the “fast-tracked” projects are likely to steal most of the headlines in 2010, we believe the more significant story will be the progress of the BLM’s Programmatic EIS (PEIS).  The PEIS is an extensive EIS that covers the region attracting solar developers, but does not evaluate specific proposals. If successful, the study could be used by future applicants to shorten the approval process by a considerable amount. To appease conservationists, the PEIS is now focused on just 24 zones that cover 670,000 acres and have nearly 100 GW of potential capacity.  Given that the cumulative U.S. solar capacity is currently less than 2 GW, successful completion of the PEIS could be a “game changer” for solar.  The study isn’t likely to be completed until 2011, but the outlook should be clearer when a draft is released sometime in 2010. 

Millions of acres of federal land are already in use by the fossil fuel industry with mining claims and drilling leases. Whether solar power will ever enjoy similar privileges is unclear, but we should get a better picture this year.

Robert Lahey is the Senior Legislative Analyst at Ardour Capital Investments, LLC, and can be reached at [email protected]. Founded in 2002, Ardour Capital is the leading research and investment-banking firm exclusively focused on energy technology, alternative energy and power, and clean & renewable technologies. Ardour Capital publishes in-depth company coverage and industry specific research. Ardour Capital offers private and public companies a full range of corporate finance, investment banking and capital market services. Ardour Global Indexes is a family of pure play alternative energy indexes that is the primary measure of cleantech equity performance.