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Summary:

Throughout 2007, PG&E has touted its renewable energy road map, pledging to add clean power generation from sources like solar and wind as it works to reach the California state mandate of 20 percent of utility power from renewables by 2010. While the utility is close […]

peterdarbee1.jpgThroughout 2007, PG&E has touted its renewable energy road map, pledging to add clean power generation from sources like solar and wind as it works to reach the California state mandate of 20 percent of utility power from renewables by 2010. While the utility is close to its goal, when it comes to “delivered power,” it might not make it in time, PG&E’s CEO Peter Darbee acknowledges in an interview with the San Francisco Chronicle. And the reason he gives? The renewable energy startups building these plants aren’t yet technically “able to deliver” on that scale. “What we have seen is that the market has been pretty thin,” Darbee is quoted as saying.

If the demand from the utility and regulation is there, where is the supply? It’s basically a chicken-and-egg problem. Large-scale, clean power-generating technology, including even the more proven solar thermal plants, are new enough that they’re still financially risky. The technology is being built by cleantech startups — like Ausra and Solel, with which PG&E has already cut solar thermal deals — many of whom don’t have investment-grade credit ratings. The plants need to be built for the risk and costs to go down, but as Darbee points out, some of these technologies are “quite expensive.”

PG&E wants help mitigating some of that risk, including the establishment of standards towards meeting the mandate:

What we’re trying to do is work with the (Public Utilities) Commission to come to an agreement on what are the minimum standards in terms of credit, what are the minimum standards in terms of the certainty of the technology. How much would we be willing to pay in order to meet the 2010 standards?

Darbee says one of the answers could be PG&E getting more involved in “investing in and owning renewables.”

What we would probably do is enter into contracts with people who would build them for us. We would wind up owning them and have the financial power to put $500 million or something like that into a renewables project. Whereas an undertaking of that scale might be well beyond the reach of one of these small startups.

I wonder exactly what that ownership deal would look like, and how much negotiating power more high-profile startups like Ausra (backed by the Doerr/Gore duo at Kleiner Perkins) would have. As more of these large-scale solar thermal plants are negotiated and built, hopefully we’ll get a better sense of the right financing and business model. It’s still early days.

  1. Especially solar projects are tough, I’d imagine. With costs in the range of around 5 times for the same output as wind you’d need an optimistic investor. Don’t look on the finance market. Without any track record, what would they raise debt/equity against?

    Where will PG&E get those 500m from? Wouldn’t anyone think at least twice before giving that amount for renewables, even if it’s PG&E asking for it?

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