Texas Left In The Dark On Solar Power Development

Texas solar companies are booming… just not in Texas. Dallas renewable energy investor Panda Power Funds is developing one of the country’s largest solar power plants… in sunny New Jersey. Texas’ second-largest power generator, NRG Energy, is investing in the world’s largest solar thermal power plant… in California. Solar incentives in Texas have come to the surface in the statehouse, only to be pulled down by an assortment of reasons.

If fossil fuel were priced at the true cost, solar would not need incentives to be competitive. Solar and wind energy do not produce air, soil and water pollution. You don’t have to clean up sunlight spills or worry about wind emissions. The health risks of sun exposure don’t increase because the energy is harnessed for human consumption.

Texas is No. 9 among states when it comes to the amount of sunlight that could be used to make electricity. But the state ranks 16th in the amount of solar electric generating capacity actually installed. New Jersey is No. 2; California is No. 1 reports the Dallas Morning News in an article by Elizabeth Souder. “It’s really a shame in Texas. We’ve got good sunlight. It’s really a shame that we don’t have a more aggressive solar program,” said Panda’s managing director of development, Ralph Killian.

Solar producers say Texas will fall behind economically without an aggressive push into solar energy. They blame state leaders for not providing the financial backing to attract the industry to Texas. And they hope a new legislative session beginning in January will create those incentives.

Critics say solar incentives are unnecessary and wasteful. They say Texans benefit from lower prices for electricity generated with other fuels. During the last session of the Legislature in 2009, a solar incentive bill wound its way through committees and debates until it lacked only House approval. The bill, which called for charging electricity customers fees to pay for rebates to solar generators, represented a rare consensus among environmentalists and business leaders.

On the final Friday of the session, as the clock ticked down, the solar bill was up for a vote. Lobbyists felt sure they had the votes to pass.

Then, the words that killed the bill: “I wish to raise a point of order.”

And they came from an unlikely person: Rep. Sylvester Turner, D-Houston.

Turner, who has long served on committees that handle electricity issues, raised parliamentary questions that stopped the solar incentive legislation. “What they are not telling you,” Turner told lawmakers that evening, “when you vote for solar power incentives, you are voting to increase your electricity bills.” “You just killed the bill,” said Rep. Patrick Rose, D-Dripping Springs. “Don’t make it seem like I am the villain. I have every right to represent my district,” Turner said.

Solar power developers say they build projects in states with the sweetest solar incentives. Otherwise, they can’t yet make money with solar.

Consider plans to build the world’s largest solar thermal power plant in California’s Mojave Desert. Solar thermal plants use mirrors to concentrate the sun’s rays and turn the heat into electricity.

NRG Energy plans to invest $300 million in the $2 billion development. The 392-megawatt solar project won a federal grant and a loan guarantee.

It will also benefit from California’s generous renewable portfolio standard, which requires utilities to get 20 percent of their power from solar renewable sources. California sets aside money to help build renewable power plants, and the state offers rebates to consumers who install their own solar panels.

NRG chief executive David Crane knows he could save money by building a conventional, fossil-fuel plant. He said he prefers to have a diverse fuel mix.

“It’s basically the tyranny of natural gas right now,” he said. Anyone who expects natural gas prices to remain at their low current prices for the long term will only build natural gas power plants.

“We, in fact, do not believe that at our company,” Crane said, adding: “A lot of people can’t see beyond the current price of natural gas.”

Crane has developed coal, natural gas and wind plants in the past few years in Texas. But his attempt to develop a solar plant failed.

NRG negotiated with the city of Houston to build a solar plant and sell the power to the city. Talks unraveled over a law banning the city from committing to a multiple-year contract.

“That’s how the city has to do business,” said Houston spokeswoman Janice Evans. “There’s no way within the city’s annual funding that you can do a 25-year contract.”

But NRG couldn’t risk having the contract dropped one year, without enough revenue to pay for the solar equipment.

Another Texas company, Panda Power Funds, announced in October that it will invest in a large, faraway solar project. The Dallas investment company, along with Con Edison, will develop a 20-megawatt photovoltaic solar farm in New Jersey.

The state won the $90 million plant because of its stiff renewable energy requirements. New Jersey requires utilities to buy solar power by trading solar renewable energy credits. The goal is to generate 22.5 percent of New Jersey’s power with renewable plants by 2021.

Texas has a similar program that is entirely satisfied by wind energy, whereas New Jersey requires a portion of the credits to come from solar. Those solar credits have been trading as high as $540 per megawatt hour a huge premium, considering that wholesale power in Texas often trades at around $20 to $30 per megawatt hour.

New Jersey consumers spent around $80 million on solar credits in fiscal 2010. That is, New Jersey electricity customers paid $80 million extra, just to have solar electricity. That amount could decline as more people install solar panels, adding competition to the credit market.

Residential customers in New Jersey paid around 17 cents per kilowatt hour for electricity in July. That’s above the average in Texas and the national average, which are both 12 cents, according to data from the federal government.

Texas offers some incentives for small solar power installations. Oncor, the electricity delivery company for North Texas, offers rebates. And some municipal electric companies, such as Austin Energy and CPS Energy, are investing in solar power.

Solar advocates acknowledge the technology is more costly than other types of power generation. But they see the extra cost as an investment in attracting the fledgling industry to Texas.

Luke Metzger, director of Environment Texas, said the cost of solar power generators will drop to the level of other technology in a few years, and won’t need government incentives to be profitable.

“At that point, the question is, will Texas be able to capture that market that will be billions of dollars for centuries to come?” he said. “We could lose out to China or New Jersey, or, if we make some modest investments now, Texas could be the center of solar production for the rest of the century.”

Applied Materials Inc. makes the machines that make solar panels. Spokesman Matt Ceniceros said the solar industry needs to see a stronger market for its products, bolstered by incentives, before companies will build factories here.

“It’s not about cheap labor. It’s about investing in the industry,” he said. “Our customers would need a favorable business climate to get in the game.”

Rep. Mark Strama, D-Austin, said he viewed the solar legislation last session as Texas’ shot at becoming ground zero for the solar industry.

“At the time, I felt there was a unique window of opportunity that might close between last session and the current session because there was so much federal money moving into solar that the industry might mature very rapidly and the clusters, the industry clusters, would be sort of solidified before we could get back into session,” he said.

But that didn’t happen because the recession delayed investment in solar. This session, Strama said, lawmakers have a second chance.

Strama’s idea this time is to capture some of the hidden value that solar offers. For example, solar panels on homes deliver electricity without clogging transmission lines. And solar plants generate electricity during hot, sunny times, when people demand the most power for air conditioning.

“I just know the market isn’t working correctly when all those real values of solar don’t show up in the process,” Strama said.

He also suggested offering a solar rebate to schools to install solar panels. Schools could cut their utility bills by generating their own power. And in the summer, schools could sell the power they don’t use back to the electric provider, he said.

Strama would pay for the school rebate with a charge on customer bills. And therein lies the problem for people who doubt solar installation are the best use of utility fees. Even with a rebate, low-income school districts might struggle to afford solar photovoltaic panels, and the fee could become a subsidy for the wealthy.

Turner, who killed the solar bill last session, said he would support incentives that don’t require low-income people to pay more for electricity.

“For people who are operating on the margins in terms of how much they can pay on their electricity bills right now, to say to them, ‘You have to pay more in order for us to have solar power,’ when they can’t afford electricity right now, is a nonstarter for them,” he said.

Perhaps, he said, Texas could offer incentives for solar manufacturing companies to build factories in distressed urban areas.

Or perhaps, he added, the state could stop sucking the System Benefit Fund fee that utility customers pay each month into the broken general budget, and use it for its intended purpose to help low-income people pay their light bills. Then, Turner said, he’d be willing to talk solar.