Taxpayers, ratepayers will fund California solar plants

Driven by the Obama administration's vision of clean power and energy independence, the rush to build large-scale solar plants across the Southwest has created an investors' dream in the desert.

Taxpayers have poured tens of billions of dollars into solar projects — some of which will have all their construction and development costs financed by the government by the time they start producing power.

Banks, insurers and utility companies have jumped in, taking advantage of complex state and federal tax incentives to reap outsized returns. Among the solar prospectors in the Mojave are investor Warren Buffett's Berkshire Hathaway Inc., General Electric, JPMorgan Chase & Co., Morgan Stanley and technology giant Google Inc.

The cost for decades to come will also be borne by ratepayers. Confidential agreements between solar developers and utilities lock in power prices two to four times the cost of conventional electricity. The power generated by the mega-plants will be among the most expensive renewable energy in the country.

That high-priced power will compose an increasing share of California's electricity following Gov. Jerry Brown's signing last year of legislation requiring that renewable sources provide 33% of the state's power by 2020.

Stanford University economist Frank Wolak, an expert in the California electricity market, said the state's renewable energy strategy could boost electricity rates 10% to 20%, depending on a number of factors. Potentially, consumers' bills could go up by 50%.

"It is easily in the billions of dollars," he said.

Government and solar officials say the subsidies are no different from long-standing federal support for the oil, gas and nuclear industries. They say generous incentives are necessary to incubate the fledgling renewables industry.

"We are driving clean energy projects that would otherwise not have gotten built at a commercial scale with innovative technology," said Daniel Poneman, deputy secretary of the U.S. Department of Energy.

Energy Department officials say solar energy prices will fall as the industry matures, and the cost of power from future conventional plants will be higher.

Critics, however, say that despite the righteous goal of combating climate change, solar entrepreneurs are getting too much government money.

"What's happening in California is a tragedy, on every front," said Bill Powers, a San Diego-based electrical engineer and power plant consultant to government, nonprofits and developers. "It's a huge waste of money…. I see a lot of this as just an old fashioned rip-off."


 

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