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Clean energy: Costs rising for California consumers

Clean energy got a boost from a 2006 California law mandating it. But some clean energy projects are so expensive, they'll raise consumers' utility bills for decades.

By Garance Burke and Jason DearenAssociated Press / November 13, 2011

A Solar Row(TM), designed by Envision Solar, offers shade beneath a canopy of photovoltaic panels at St. Mary Medical Center in Apple Valley, Calif., in this 2008 file photo. An independent watchdog of California's utility regulator estimates that 59 percent of the approved renewable energy contracts were above market value.

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SAN FRANCISCO

Dozens of renewable energy plants being built to meet California's tough global warming laws, including a major Spanish-owned solar plant in the Mojave Desert, are so overpriced they will increase consumers' energy bills for decades, according to the independent watchdog arm of the state's s utility regulator.

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California's 2006 landmark climate law has driven demand for solar and wind power and spurred renewable energy development both in-state and in neighboring states. The law seeks to reduce California's release of greenhouse gases to 1990 levels by 2020, and the state has set goals to have one-third of its electricity derived from renewable sources by then.

The push for renewable energy has created huge financial incentives for utilities — including both federal loan guarantees and state subsidies — and power companies have rushed to sew up power generation contracts needed to meet California's new, tough standards.

The California Public Utilities Commission on Thursday approved a request to build the Abengoa solar thermal project in the vast expanses of the Mojave, despite one commissioner's objections that the project was at least $1.25 billion over market price. When completed, the plant would generate enough power for about 54,000 homes.

Yet the commission's internal consumer advocacy unit, the Division of Ratepayer Advocates, said the deal is one of dozens of overpriced contracts rubber-stamped by the commission in recent years, giving away too much to utilities and hurting consumers.

"We're in good shape for supporting renewables. It's not like we have to take every high-priced contract that comes in the door," said Joe Como, the division's acting director. "In the long run, this harms the state's efforts to achieve greenhouse gas reductions because it will result in unnecessarily higher rates and people are going to get rate shock."

Earlier this year, the watchdog unit estimated that 59 percent of the renewable energy contracts that the commission approved in recent years were above market value, according to the commission's own pricing benchmark for when the contracts were signed. The contracts involved a variety of utilities and developers.

Commission President Michael Peevey, who pushed to approve the Abengoa contract with no modifications, said the Mojave solar plant's benefits could not be measured by cost alone. Peevey said the project would help the state meet its 33 percent mandate by 2020.

The project's decades-old technology — use of mirrors to capture the sun's heat and power steam turbines to generate electricity — is still efficient and effective, Peevey said.

"The West Mojave region has been identified as a prime location for renewable energy," Peevey said in the commission's meeting Thursday. "Forcing PG&E and Mojave Solar to modify their signed contract puts in jeopardy Mojave's $1.2 billion (U.S. Department of Energy) loan guarantee."

DOE completed Abengoa's loan guarantee in a rush of approvals before the Sept. 30 deadline for the controversial loan program that has come under scrutiny after the bankruptcy of solar panel manufacturer Solyndra, which received a half-billion dollars in federal loans.

Under a power purchase agreement with Abengoa, Northern California's largest utility Pacific Gas & Electric Co. will buy 250 megawatts worth of solar thermal power generated by the Spanish-owned plant over 25 years.

The exact amount PG&E will pay Abengoa and the costs directly passed on to customers remain confidential.

Commission energy staff estimated in 2009 that by 2020 consumers' rates statewide would go up by 28 percent overall. They attributed about one-third of that price hike as being due to renewables being phased in to meet the state's requirements.