San Diego Business Journal

Alternate Power Producers Brightened by State Plan

By Lee Zion
February 25, 2002

Locally based alternate energy providers are looking forward to getting their share of up to $5 billion from the state for solar and wind power projects.

The California Consumer Power and Conservation Financing Authority released its energy plan Feb. 15, calling for investing in alternative power and conservation projects as the state looks to prevent a repeat of last year's energy crisis.

The plan will go before the Legislature and governor for review, although a spokeswoman for the power authority did not have a schedule.

Already, the power authority's plan has some backing. Noting that a shortage of energy helped spark the energy crisis, Gov. Gray Davis released a brief statement of support.

"This plan reminds us of the job ahead, to insure that we will never be held hostage again by (the) out of state generators who drove up energy prices," he said. "We need to make aggressive investments in energy efficiency and renewable energy. Alternative energy is not only good for our air, but good for our economy."

Alternative energy producers praised the plan. Bud Dally, vice president of engineering for Independent Energy Solutions, knows what the plan means for his company. His company has already put in a bid to install solar power generation for the power authority.

That could amount to about $100 million worth of work over the next four years, and 16 new jobs, Dally said.

The power authority was helping to fulfill a need for solar energy. Currently, the technology is costly, and few customers are able to afford it, he said.

"For an institution like the power authority to come in with this money and say, 'We're willing to purchase it,' helps us a lot," Dally said.

Scott Gressitt, consultant with San Marcos-based SweetWater Energy, agreed. His company, which plans to build solar and wind projects throughout California and Nevada, is negotiating with the governor to get the state to purchase their power, he said.

"It takes us 10 years to get our investment back. Thus, we're interested in having a customer to buy the power, so that we can go out and raise the money to build the plant," Gressitt said.

As a greater variety of power projects are added to California's energy mix, the overall price of electricity per kilowatt will go down, he added.

Gressitt added that Sept. 11 and other developments may have pushed the California energy crisis off the front page, but the problem is no less dire.

'Still In An Energy Crisis'

"People are still ignoring the fact that we're still in an energy crisis," he said. "People getting bills from SDG&E — when the governor's rate cap comes off in December 2002, there's going to be a whopping bill for everybody."

Michael Shames, executive director of the Utility Consumer's Action Network, agreed. California has previously failed to diversify its energy crisis, he said.

The power authority's plan will help California conquer that problem, Shames said.

"One of the major weaknesses in the California energy strategy, is that it's overly reliant on natural gas," he said. "And as any amateur investor will tell you, when you put all your eggs in one basket, you're setting yourself up for some serious omelets."

Shames was particularly supportive of efforts to encourage more conservation. During the state's energy crisis, providers tried to "game" the market, leading to price shocks. Conservation is the biggest weapon consumers have against runaway prices, he said.

'Demand Response'

"If they try to control supply, and you have the demand-side response, then you can thwart an effort to corner the market or create artificial scarcity," Shames said. "The difficulty in developing a demand-side response ... gave the generators and marketers the strategic advantage that they had."

Another advantage of conservation is that it's instantaneous, with the flick of a switch. With most conventional energies, it takes several hours to turn on a generator and bring it to full power, he said.

Shames isn't worried about the possible $5 billion price tag on the plan. As he understands it, that's the maximum amount of money the power authority has available, and not the total amount of money the agency plans to spend.

"There's not a chance that they could float or find $5 billion worth of green energy, even if they wanted to," he said. "What they have to do is get a sense of what the waters look like. They have to see whether there are sufficient green energy alternatives that are cost effective enough that it justifies the financing."

3,500 Megawatts

The energy plan calls for 3,500 new megawatts of electricity to come from clean, alternative sources by the year 2006. By the year 2010, one-fifth of all the state's energy needs, or about 8,000 megawatts, will come from alternative power, the report stated.

Most of the investment would be in alternate energy, revamping older, less efficient with devices to generate their own power or reduce power use.

The agency will also act as a broker to match alternate energy providers with buyers. In some cases, it could support bulk purchases from suppliers of solar power and fuel cells, who may need long-term contracts in order to stay competitive, the plan stated.

In other cases, the power authority would oversee the building of new power plants. The plants themselves would be owned by private investors, while the state would regulate the energy contracts under which power gets sold.

This approach would assure the plant is run for the public good, while the state benefits from the efficiency of the private sector, the plan stated.