[Senate Hearing 110-570]
[From the U.S. Government Publishing Office]
S. Hrg. 110-570
ELECTRICITY GENERATION
=======================================================================
HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
TO
CONSIDER THE VALUE AND EXAMINE THE PROGRESS OF ELECTRICITY GENERATION
FROM CONCENTRATING SOLAR POWER
__________
ALBUQUERQUE, NM, JULY 2, 2008
Printed for the use of the
Committee on Energy and Natural Resources
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45-190 PDF WASHINGTON DC: 2008
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
JEFF BINGAMAN, New Mexico, Chairman
DANIEL K. AKAKA, Hawaii PETE V. DOMENICI, New Mexico
BYRON L. DORGAN, North Dakota LARRY E. CRAIG, Idaho
RON WYDEN, Oregon LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota RICHARD BURR, North Carolina
MARY L. LANDRIEU, Louisiana JIM DeMINT, South Carolina
MARIA CANTWELL, Washington BOB CORKER, Tennessee
KEN SALAZAR, Colorado JOHN BARRASSO, Wyoming
ROBERT MENENDEZ, New Jersey JEFF SESSIONS, Alabama
BLANCHE L. LINCOLN, Arkansas GORDON H. SMITH, Oregon
BERNARD SANDERS, Vermont JIM BUNNING, Kentucky
JON TESTER, Montana MEL MARTINEZ, Florida
Robert M. Simon, Staff Director
Sam E. Fowler, Chief Counsel
Frank Macchiarola, Republican Staff Director
Judith K. Pensabene, Republican Chief Counsel
C O N T E N T S
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STATEMENTS
Page
Andraka, Charles E., Sandia National Laboratories, Albuquerque,
NM............................................................. 12
Bingaman, Hon. Jeff, U.S. Senator From New Mexico................ 1
Daly, Michael, Mesa del Sol, Albuquerque, NM..................... 28
Domenici, Hon. Pete V., U.S. Senator From New Mexico............. 2
Marker, Alex, Research Fellow, Schott North America, Inc.,
Elmsford, NY................................................... 31
Morse, Frederick H., Senior Advisor, U.S. Operations, Abengoa
Solar, Inc..................................................... 23
Nelson, Greg, Director, Utility Services, PNM Resources,
Albuquerque, NM................................................ 7
Sanders, Hon. Bernard, U.S. Senator From Vermont................. 5
Wan, Fong, Vice President, Energy Procurement, Pacific Gas &
Electric Company, San Francisco, CA............................ 39
APPENDIX
Responses to additional questions................................ 59
ELECTRICITY GENERATION
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WEDNESDAY, JULY 2, 2008
U.S. Senate,
Committee on Energy and Natural Resources,
Albuquerque, NM.
The committee met, pursuant to notice, at 10:09 a.m. at the
International Programs Building, Sandia Science & Technology
Park, 10600 Research Road SE, Albuquerque, New Mexico, Hon.
Jeff Bingaman, chairman, presiding.
OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW
MEXICO
The Chairman. OK. Why don't we go ahead and get started?
This is a hearing of the Senate Energy and Natural Resources
Committee that I am privileged to chair; Senator Domenici is
the ranking member and Senator Sanders is a loyal member of our
committee as well.
Let me just give a short statement and then call on Pete to
make his statement, and Senator Sanders to make his. Then we
will jump into the witnesses.
This is a hearing on a particularly important issue at this
point in our history. I think a lot of the focus related to
energy nationally is on the price of oil, and that is
understandable. We are all worried about that, obviously, and
we have tried to do some things with regard to that that we are
still trying to add to in Washington.
Today we are focused on the issue of generation of
electricity. For years, in fact, since 1978, the Federal
Government has been trying to encourage the use of renewable
resources for electricity generation. The frank truth is we
haven't made much progress. Currently, about 3 percent of our
electricity comes from non-hydro power renewables.
I think recently wind generation has been growing at a
rapid rate, and over the last 2 years, it has been the fastest-
growing source of new generation, which is encouraging. But
that still leaves it with a very small share of our generation
mix. Other technologies, renewable technologies have lagged
behind.
Concentrating solar power, which is the subject of this
hearing, has been pointed to as the next inheritor of the
mantle that wind now wears. The primary reason that wind power
has outdone other renewables is that it is cheaper than other
technologies. It is about 8 to 9 cents per kilowatt hour, which
is about the same as natural gas. Many in the industry believe
that concentrating solar power could reach that price range
within 5 to 10 years simply from the economies of scale that
could come from installing a great deal of this capacity.
CSP, or concentrating solar power, has some real advantages
over wind. The biggest is that it is less intermittent. In
parts of the country where the solar resource is best, such as
New Mexico, it is much more predictable than wind. It also may
allow for easier storage of energy since it can use heat
storage and does not depend on further development of battery
technologies. That makes it more responsive to the actual needs
of the users of electricity.
There are many reasons for us to pursue the goal of greater
deployment of concentrating solar power as well as other
renewable technologies. The Federal Government obviously has a
significant role to play here. One issue that I know is on the
minds of many here is the tax credits that we need to be
extending in Washington, and I know there is going to be a
continued push to get that done in the next month or two.
I believe, myself, that we should also enact a renewable
electricity standard that would require utilities to acquire a
set percentage of their electricity from renewables, and of
course, we have that in New Mexico at the State level.
Another issue confronting all renewable generators is the
inadequacy of the transmission system to carry the electricity
that could be produced. We had a hearing on that issue a couple
of weeks ago in Washington, and I hope that that hearing leads
to some productive solutions on that score.
I wanted particularly to congratulate the utilities--Public
Service Company of New Mexico, El Paso Electric, Xcel Energy,
and Tri-State--for their announcement this week of a request
for proposal for concentrating solar power generators to supply
citizens here in New Mexico.
When we get to the witnesses, we are going to call on Greg
Nelson from PNM to give us an overview of that proposed project
and the reasons why they have chosen this technology to pursue.
We have a panel of very distinguished witnesses today, and I
look forward very much to their testimony.
Let me now call on Senator Domenici for his comments, and
then on Senator Sanders.
STATEMENT OF HON. PETE V. DOMENICI, U.S. SENATOR FROM NEW
MEXICO
Senator Domenici. Thank you very much, Mr. Chairman.
Might I first say how much we appreciate Senator Sanders
being with us? Since you didn't welcome him, don't mind if I
do.
[Laughter.]
The Chairman. You go right ahead, and I am well following
you.
Senator Domenici. I wanted to tell him how different things
are here than in your State. This is a much, much different
State. But we know that you love what you have, and we want you
to come here and learn about ours so you can love our State.
Then all these things that Jeff needs in years to come when I
won't be there, you will be voting ``aye'' every time.
Senator Sanders. Every time----
[Laughter.]
Senator Domenici. If you don't, he will remind you of the
pleasantries of today and of the cordiality of New Mexicans.
Let me say to everybody here, you know, I don't know why--no
reason at all--but he and I have become friends.
[Laughter.]
Senator Domenici. We actually go out of our way to shake
hands on the floor of the Senate, and that is kind of nice. We
smile at each other and almost act like we are long-lost
friends. That couldn't be because, you know, I am so much older
than him, we couldn't be long-lost friends. But I do want to
say that I not only appreciate you being here, but I very much
appreciate the hard work you do. Whether I agree with you
ideologically on whatever it is, I am a fan of your hard work.
Let me say I have a prepared statement that this wonderful
staff of mine has prepared. But I think Senator Bingaman
covered it. So if you don't mind, I am just going to put it in
the record with your permission, Mr. Chairman.
The Chairman. Very good. Included.
[The prepared statement of Senator Domenici follows:]
Prepared Statement of Hon. Pete V. Domenici, U.S. Senator From
New Mexico
Thank you, Mr. Chairman, for calling this hearing on an issue of
enormous potential--Concentrating Solar Power. I am pleased to be back
here at Sandia today and I'd like to welcome Senator Sanders from
Vermont to our great state.
According to the Energy Department, ``more energy from sunlight
strikes the Earth in one hour than all the energy consumed by human
activity on the planet in one year.'' I find that remarkable--just one
hour of sunlight contains more energy than is used worldwide for an
entire year. New Mexico is truly blessed to have this abundant, carbon-
free source of energy--if we can harness it.
There is no question that America needs to become less reliant on
foreign sources of energy. Over the last several weeks, I have been
telling Americans that we are on the verge of economic destruction if
we do not address the high price of gasoline.
I believe that we need to increase American production of oil by
opening up new areas for exploration as soon as possible. But this oil
production in the near term will provide us with a bridge to a clean
energy future. On the other side of that bridge is an economy driven by
clean energy technology like solar panels.
The good news it that our government has already invested literally
billions of dollars for research and development of renewable
technologies like wind, biomass and solar. In fact, for solar alone,
we've spent more than $4 billion. And there are billions more to come
for all forms of alternative energy.
One of the most important issues facing the solar industry right
now is that tax credits that we passed in a bipartisan manner to help
spur development are set to expire. It is of critical importance that
they be extended--as soon as possible.
Congress has passed tax credits for renewable energy six times
since 1992. Unfortunately, the Majority in the House of Representatives
has decided to change the way we pass these credits by requiring that
they be ``offset'' by tax increases on other industries.
Requiring ``offsets'' to provide tax credits for renewable energy
makes little sense, particularly in light of a new study released by
General Electric that shows that the renewable energy tax credits
already pay for themselves. By spurring the growth of a new, clean
technology industry, the renewable energy tax credits provide the
government revenues from the projects' income, vendors' profits, and
workers' wages.
In addition, Congress has never before required offsets for
renewable energy tax credits. By setting a precedent that from now on,
offsets will be required, the Majority is putting the renewable
industry in the difficult position of having to fight for tax increases
every single year. I believe that this is a bad precedent to set.
The Albuquerque Journal echoed this sentiment in a recent Op-Ed
calling on Congress to move forward on a bipartisan bill. The Senate
has already done so by approving the Cantwell/Ensign energy tax package
by an overwhelming vote of 88-8. It is my hope that the House Majority
will drop their objections to passing a clean extension of renewable
energy tax credits and pass this bipartisan package as soon as
possible.
Thank you, Chairman Bingaman, for convening this morning's hearing.
Our impressive panel of witnesses are involved in all aspects of the
solar industry--from performing the R&D work, to manufacturing plant
receivers, to building the CSP plants, and finally, to purchasing the
resulting electricity. I thank you all for being here today and I look
forward to your testimony.
Senator Domenici. I just want to say thanks to all you
witnesses who are lined up here. I know you have something to
contribute, and we want to hear it.
I, myself, in preparing for this hearing, was a little bit
aghast by the Spanish company. In their notebook, they had
prepared a trend line of how long it takes from starting a
plant to building one. I was quite amazed, and I hope you will
tell us all about that.
I hope that isn't the national standard. I read your notes.
It takes 6 to 8 years from the time you get ready to do one of
these until you break ground. That is almost as long as a
nuclear power plant, and I don't think they are quite as
complicated. But perhaps I am missing something.
The other point I wanted to make is that it doesn't sound
possible, but, you know, the Sandia National Laboratory was
working on this kind of solar energy early in my Senate career.
I mean, it was like 30 years ago we used to go out and look at
the troughs, which is one kind of concentrated solar, and they
would show us what the shortcomings were. Then they would solve
those, and there would be another one.
But I continue to be amazed at not you, Sandia, but just at
America, how long it takes to go from the research to the
development to the actual application. Let me just say I don't
think we can afford 10, 15 years on big energy projects that
substitute even directly or indirectly for crude oil.
I don't think we can sit by and let those projects take 8,
10, 15 years to reach fruition because I believe the dependence
on crude oil is real, and we can't get out from under it, no
matter how hard we try, for a long, long time. That is a
destructive thing. It is destroying our economy. This huge
amount of money we send overseas is unbearable for the great
country called America.
We won't stand to spend half a trillion a year for 10 years
while we wait around for some substitute. Can't happen. We
can't let it happen. Even your great project won't be around.
But as it is, we aren't going to have the resources hanging on
for so long. So I am very concerned about how long it takes for
alternative energy development.
Last, but not least, I do know, without the testimony, that
we must have a tax credit, the 30 percent that you all know we
need, for the kind of solar we are talking about. I know some
people blame us Republicans, and we Republicans blame them.
[Laughter.]
Senator Domenici. What we really have to do is we have to
decide who is going to give. I don't know who is going to give
yet and how long it will take. But we act one way based on what
we think is a good rationale, and the Democrats--because of the
House, Democrats in the Senate act another way, and we don't
get anywhere.
But I will tell you, I support it. So don't put me in an
``anti'' position. I support it wholeheartedly. I don't know
how to get around the problem unless Senator Bingaman and I
decided that we might come up with a bipartisan substitute, and
maybe we will. I don't know. We might try when we get back. If
we did, it would go. It would pass. But we haven't been able to
do that yet.
So please understand you can blame whomever you blame, but
I have a good answer for why I can't vote for the way it is
being done, and he has a great answer for why they are voting
the way they are. We both want it done, and we voted 88 to 8 at
the last vote for you. So you know it is bipartisan.
With that, thanks for calling the hearing, Senator
Bingaman.
The Chairman. Thank you very much.
Let me just say a few words of welcome and introduction.
[Laughter.]
The Chairman. This hearing really is being held at the
urging of Senator Sanders. He has been urging me now for
several months to have a hearing on concentrating solar power.
I suggested we do it out here in Albuquerque, which he was very
agreeable to, but that somewhat explains his presence here. He
is a great advocate for all renewable energy sources. In
particular, this very much, I think, as his own statement will
indicate, he is very much aware of the potential of this
particular technology.
So, Senator Sanders, thanks for being here.
STATEMENT OF HON. BERNARD SANDERS, U.S. SENATOR FROM VERMONT
Senator Sanders. Senator Bingaman, thank you very much for
welcoming me here. Senator Domenici, thank you very much for
your kind words.
I just want to tell the people of New Mexico that you have
two great Senators. At this particular pivotal moment in
American history regarding energy, we are all fortunate to have
Senator Bingaman in the chair.
I can also tell you that while Senator Domenici and I
certainly have differences of opinion, there is nobody in the
Senate, I think, who is more respected and better liked than
Senator Domenici. I just want to thank you for your years of
service not only to the people of the State, but to the entire
country. Thank you, Pete.
This is an extraordinarily important hearing and an
extraordinarily important moment in American history. I don't
want to renew the debates that are taking place in Washington.
I happen to believe global warming is real. It is of enormous
consequences to this planet. If we do not get our act together,
our children and grandchildren will be living on a planet with
a significantly inferior quality of life.
What we are already witnessing is increased droughts,
flooding, severe weather disturbances, the CIA and the
intelligence agencies telling us that as water disappears, as
food land disappears, there is going to be increased
international conflict and war. I think we have no alternative
but to move aggressively and boldly in addressing this
international crisis. I want to see this great country once
again be a leader in the world in going forward in terms of
energy efficiency and sustainable energy as we do it.
So the bad news is we have a very serious problem. But
there is good news out there, and the good news is that we know
how to address this crisis.
The other very good news is that it is not just
intellectual knowledge. We now have the technology to do that
as a result of extraordinarily good scientific work, including
the work done here at Sandia, and engineering work done all
over our country. The tools that we need are moving forward
aggressively, in my view, in energy efficiency, an area my
State has done a very, very good job, and moved forward in such
sustainable energies as solar, wind, geothermal, biomass.
I happen to believe that solar, especially concentrated
solar, has extraordinary potential to produce huge amounts of
electricity, and we are right in the middle--right here in New
Mexico, Nevada--right in the middle of the area that has the
capacity to do that. There are scientists and, I expect, people
who will be testifying today who will tell us that within a
reasonably short period right here in the Southwest, we could
produce 15 to 20 percent of the electricity that we need in the
country. In years to come, we can do even more than that. That
is extraordinary.
Second of all, in terms of the cost of this electricity,
what even the folks at Sandia are telling us that the more
electricity we produce, the more we learn about this
technology, the cost will go down. It will be competitive or
maybe even be more competitive than other fuels that we are
using today.
Third, as we clean up our environment, as we begin to
reverse global warming through concentrated solar, through
photovoltaic technology, through wind, through geothermal,
through biomass, we are also going to create millions of good-
paying jobs. Sometimes I get a little bit tired, the Senators
and I hear folks are saying, well, the world is coming to an
end, you know? It is going to be a great economic disaster.
As we move forward in new technologies, I believe
absolutely the opposite. I believe there is enormous economic
potential not just for the Southwest, but all over this country
in creating good-paying jobs. I want to thank Senator Bingaman,
Senator Domenici. On the energy committee, we have made some
progress in the recent energy bill. But we have a long way to
go. We do. But that was a good bill. It was a bipartisan
effort, and we have made some progress.
Let me just, if I might, Mr. Chairman, voice one note of
concern before we hear from our very distinguished panelists.
Some of you may have heard that the Bureau of Land Management
recently announced a moratorium on accepting new applications
for concentrated solar plants. I think that that is very
unfortunate. I will do everything that I can to rescind that
edict.
Right now, there are approximately 150 applications that
the BLM people are currently processing. To the best of my
knowledge, not one application has yet been accepted. The
reason that I hear, if you can believe it in the midst of this
grave crisis of global warming, as I understand it, we have two
people who are processing these claims. Two people.
So here we are, trying to reverse global warming, create
millions of good-paying jobs, we have got a bottleneck with two
people presumably working very hard. We have got about a $3
trillion budget. I think we can afford a few more people to
process these claims, and we will be trying to do just that.
So I am excited about this hearing. In Washington, we all
hear a lot about nuclear, and Senator Domenici and I may have
some disagreements on that. We hear about carbon sequestration,
and I have my doubts about that. We are not hearing enough
about the potential of solar in general and concentrated solar
in particular.
I think this is the most exciting, sustainable, energy
concept that we have out there, huge potential. So I thank you
very much, Mr. Chairman, for holding this hearing and look
forward to hearing from our distinguished panelists.
The Chairman. Thank you very much.
I think, since this may take us a little time to get
through all the witnesses, I am going to take off my jacket. I
urge all the witnesses or panel members to do the same, so that
we don't get too hot around here.
The beginning of this hearing is going to be Greg Nelson,
who is with PNM. He is the person who is in charge of this
recent proposal that has come out for a request for proposal. I
asked if he would go first before the other witnesses and sort
of frame the issue and indicate to us what has led PNM and the
other utilities to this point of looking at this particular
technology, this concentrating solar power technology and what
they anticipate going forward with this.
So, Greg, thank you very much for being here on short
notice. Please go ahead and give us an overview on this, and
then we will call on each witness.
Our normal practice here in the committee is to give each
witness 5 or 6 minutes to summarize the main points they think
we need to know. We will include any statements you would like
in the record in full, but I think that is the most useful
thing. Then after we hear from all witnesses, we can ask some
questions.
So, Greg, go ahead.
STATEMENT OF GREG NELSON, DIRECTOR, UTILITY SERVICES, PNM
RESOURCES, ALBUQUERQUE, NM
Mr. Nelson. Thank you, Senator.
Senators, it is a pleasure and an honor for me to be here
today to represent PNM, Public Service Company of New Mexico,
to talk about our plans for solar power. We firmly believe that
solar power is very important not only to our company, to our
State, but also to the citizens of the United States.
With that, I would like to tell you a little bit about our
RFP and the process that led us to issuing this RFP. Back mid-
year of last year, we initiated a multi-utility study with the
Electricity Power Research Institute as the project manager for
that effort. EPRI engaged solar energy experts, engineering
firms in the likes of Black & Veatch and Nexant, to support
that effort.
We also had several Federal partners in that project that
included the Department of Energy, Sandia National Labs, and
NREL. We also engaged a State partner in terms of the New
Mexico Energy, Minerals, and Natural Resources Department, and
we also included environmental stakeholders in the process.
The multi-utility study, as I said, was headed up by EPRI
with PNM as the initiating partner. Other utilities involved in
that process were Xcel Energy and their affiliate SPS, El Paso
Electric, Tri-State's Generating and Transmission, San Diego
Gas and Electric, and Southern California Edison. The purpose
of the study was to identify the most commercially viable solar
technology for a central station solar plant located here in
New Mexico.
After an exhaustive study, the conclusion was that based on
the status of the technology, solar trough was the most
applicable technology and a technology that was cost effective
enough to move forward with a large project. Secondary issues
related to the study included appropriate siting criteria,
looking at water constraints, as well as transmission
constraints.
Based on the results of that study, four utilities decided
to move forward with a central station RFP. Those four
utilities were PNM, SPS Xcel, El Paso Electric, and Tri-State.
We have joined together because we believe, one, it is the
right thing to do. The sum total of the four utilities
represent the vast majority of the electric users here in the
State. We believe that joining together for a large central
station facility makes economic sense. It helps bring down the
cost of the plant and, therefore, the cost to each of our
customers.
We, this week, issued an RFP for a facility in the range of
211 gigawatt hours to 375 gigawatt hours. That range is
equivalent to a facility without storage of approximately 110
megawatts up to 195 megawatts. With 6 hours of storage, we
expect that would go from 65 megawatts to 120 megawatts.
Criteria that we have in place is that the facility must be
located in New Mexico. We believe, according to NREL data, that
we have the second-best solar resource in the Nation, and we
want to take advantage of that for our customers and for the
citizens of New Mexico. We issued the RFP, like I said, this
Monday. We are giving respondents a couple of months to respond
to it.
We hope to have a PPA, a power purchase agreement,
negotiated and in place by the end of this year, and we hope to
have a facility online by the end of 2011. That will not only
help us meet our renewable energy RPS requirement, it will also
help us bring clean energy to the citizens of New Mexico.
Senator Domenici. What will be ready by 2011?
Mr. Nelson. We hope by the end of 2011 that we will
actually have a plant online and generating.
Senator Domenici. Delivering?
Mr. Nelson. Delivering power to our customers. Yes, sir.
Fully commercial by the beginning of 2012.
The Chairman. Very good. Did you have any more detail you
want to give us at this point?
Mr. Nelson. I would be happy to open it up to questions.
But we are putting it out on an energy purpose or on an energy
basis, where we will be purchasing the energy off of that
project along with the renewable energy certificates that go
with it.
The Chairman. Are you requiring as part of the RFP--one
question that occurred to me--that the 6 hours of storage be
built into the unit so that there will be storage capacity?
Mr. Nelson. The RFP was formulated to be as flexible as
possible to the vendors, looking for them to come up with
creative ways to bring down the cost of energy as much as
possible. We believe storage plays a large role in that. We
have encouraged the RFP bidders to propose storage in there, to
come up with a cost-effective level. But we do encourage them
to look up to 6 hours of storage associated with the project.
The Chairman. Pete, did you have a question?
Senator Domenici. Yes. What is the nature of the property
upon which the central plant would be located?
Mr. Nelson. We did not specify properties, although we have
had a number of interested stakeholders offer up their property
for the siting of this facility. Again, we wanted to leave that
up to the bidders, again, to give them the flexibility to come
in with the most cost-effective project they can.
Senator Domenici. Do you know in advance, having researched
it, whether there will be right of way problems or right of way
necessities that are going to have to be met?
Mr. Nelson. The right of way challenges we expect to face
will vary depending on the location proposed. As I am sure you
are aware, right of way and transmission constraints here in
New Mexico are very significant. So there are certain parts of
the State that are tougher to get the power back from than
others. When I say ``get the power back,'' I am talking to
basically our load center, which here in New Mexico consists of
the Albuquerque/Santa Fe area.
Senator Domenici. Mr. Chairman, I am sure that given time
we will be inquiring, but not today. We don't have enough
preparation, but I think it is good that you brought them. It
makes the hearing much more relevant because we are right in
the middle of an event of significance to us. Thank you for
that.
The Chairman. Bernie, did you have some questions?
Senator Sanders. I did. Mr. Nelson, did I hear you say that
you thought, if things go the way you wanted, you could break
ground inline and be producing electricity in 2011?
Mr. Nelson. We hope to, if all goes well with our engaged
partner--and we look at the ultimate person that we sign the
PPA with as being a true partner in the development of
renewable energy. We hope to break ground in the 2009, early
2010 timeframe and have the project online by end of 2011,
worst case early 2012.
Senator Sanders. One of the exciting attributes of
concentrated solar is the speed. In fact, I think Senator
Domenici pointed out, purposely so, it is not a complicated
technology. In fact, the generation aspect is traditional. It
is what they do with coal and gas. The speed at which one can
move these things, given the crisis that we face as a Nation,
is one of the attributes of solar power. I think you have
indicated that?
Mr. Nelson. Yes, sir. As you may be aware, a number of the
large solar firms have done solar prospecting here in the State
and identified sites, have supply chains set up. So we expect
that construction should take, for a facility of this size, on
the order of a year and a half timeframe. So that, with their
site lined up, with their supply chain in place, we believe
that the 2011 timeframe is a reasonable timeframe.
The Chairman. Thank you very much for being here and giving
us that overview. Congratulations on moving ahead with this. I
think it is a great project.
[The prepared statement of Mr. Nelson follows:]
Prepared Statement of Greg Nelson, Director, Utility Services, PNM
Resources, Albuquerque, NM
INTRODUCTION
Good morning Chairman Bingaman, Senator Domenici, Senator Sanders,
and distinguished Members of the Committee on Energy and Natural
Resources. Thank you for inviting me here today. I am Greg Nelson,
Director of Utility Services for PNM Resources.
PNM Resources is an energy holding company based in Albuquerque,
N.M., with consolidated operating revenues of $2.4 billion. Our
electric generation is primarily a mix of coal, nuclear, wind and
natural gas. Through its utility and energy service subsidiaries, PNM
Resources supplies electricity to 738,000 homes and businesses in New
Mexico and Texas, natural gas to 470,000 customers in New Mexico, and
electricity to numerous wholesale customers throughout the southwest.
Its utility subsidiaries are PNM, TNMP and First Choice Power, a
deregulated competitive retail electric provider in Texas. In November
2006, we announced a Joint Venture with Cascade Investments for the
purpose of long-term investment in both wholesale and retail
electricity sales, electricity generation and energy trading.
PNM Resources is committed to diversifying our generation. As
Director of Utility Services, one of my main responsibilities is to
oversee renewable generation, including wind, biomass, and most
importantly for this hearing, solar, from inception to commercial
viability for PNM Resources.
SOLAR
According to the National Renewable Energy Laboratory, New Mexico
is one of the best solar resource capability in the nation. We firmly
believe solar power is not only important to our company and to our
state, but also to the US.
In 2007, we initiated a multi-utility study that included Xcel
Energy, El Paso Electric Company, Tri-State Generating and Transmission
Association, San Diego Gas and Electric, and Southern California
Edison. Leading this study was the Electric Power Research Institute,
who engaged solar experts and engineering firms in the likes of Nexant
and Black and Veatch. We had several federal partners in the project,
including the Department of Energy, Sandia National Laboratories, and
the National Renewable Energy Laboratory. We also engaged the New
Mexico Energy and Natural Resources department and environmental
stakeholders including Western Resource Advocates and the Coalition for
Clean and Affordable Energy.
The purpose of this study was to identify the most commercially
viable solar technology for a central station solar plant located
within New Mexico in the 2011 to 2012 timeframe. It was determined
after an exhaustive study that, based on the status of current
technology, solar thermal parabolic trough is the most applicable and
cost efficient technology for a large project in this timeframe.
Based on these results four utilities, PNM, Xcel Energy through
their affiliate Southwestern Public Service Company, El Paso Electric,
and Tri-State Generating and Transmission Association moved forward
with a central station parabolic trough Request For Proposal (RFP). The
sum total of these four utilities represents the vast majority of the
electric users in New Mexico. We believe that joining together for a
large central station facility makes economic sense; thus bringing down
the total cost of the plant for each utility, and subsequently lowering
the cost of providing solar energy to each of our customers.
On June 30 we issued an RFP for a facility located within New
Mexico in the range of 211 gigawatt hours to 375 gigawatt hours. That
range is roughly equivalent to capacity of 110 to 195 megawatts for a
facility without storage, and from 65 to 125 megawatts for a facility
with six hours of thermal storage. We are expecting to enter into an
energy only contract, i.e. no capacity payments, in which we also
receive all renewable attributes.
We believe storage will play a large role in any future solar
facility. Consequently, we have encouraged the RFP bidders to propose
up to six hours of storage, but allow bid flexibility for cost
effectiveness.
Our goal is to have a Power Purchase Agreement negotiated and in
place by the end of 2008 and a solar facility commercially available by
the end of 2011.
CONCLUSION
Thank you for your time and consideration. I would be pleased to
answer any questions you might have and I look forward to being of
service in any way I can to this Committee.
Footnote
The issue of time of use (TOU) rates was raised during the question
and answer session. PNM does not currently have TOU rates for
residential customers, whose usage typically drives utilities' peak
loads. TOU rates are intended to pass real time pricing signals through
to consumers, which allows them to make energy consumption decisions.
Generation is typically dispatched on an economic basis meaning that
cheaper sources of generation are initially utilized followed by
increasingly more expensive sources. This translates to higher costs of
energy during high usage periods. Consequently, TOU rates financially
incent lower usage during these high cost times. Renewable energy
resources that harness the sun's power typically align well with
utilities' seasonal and daily load shapes, meaning that there is good
correlation between solar availability and high use time periods. Solar
plants produce the most energy during the summer months when energy
demand is the highest, and less in the fall, winter and spring when
energy demand is lower. With the implementation of TOU rates, the cost
of solar generation will be compared with the higher cost generation
that is online during high use times, thus making generation from solar
resources more attractive.
The Chairman. Yes, Senator Domenici.
Senator Domenici. Could I just, for the record, make an
observation about right of way? I think people might wonder if
you and I worked awful hard to put together the Energy Policy
Act, which includes a major section on right of way, how we get
right of ways, when right of ways have run into a stone wall,
so as to speak. You hear and I hear from some that we shouldn't
have done that, that we shouldn't have provided a way to break
the stalemate.
I want to say that those who think that Republicans ought
to be against eminent domain when you run into a wall, I was
heavily in favor of the right of way that we put in. You can
attest to that, and I still am. If there are any of you up here
who are going to be complaining that we shouldn't have done
that, I want you to know that the more you complain, the more I
am for changing it.
But I am for changing it to make it stronger because I
think it is ridiculous for us to be holding up major projects
because we have some ideological bent that States must control.
We are in a crisis. We have got a big plant like this, and you
have to cross State lines, and you have to find a right of way.
I hope our section, which is really not very tough--we were
pretty generous because we didn't want the bill to get killed
on the floor of the Senate.
So, it is there. It is no question that the commission has
the ultimate authority, and I am sure you are aware of that.
You would probably vote for it again if we had it again,
wouldn't you?
Senator Sanders. I think the point that you are making is
everybody--you know, we can complain and moan and groan, but if
we are going to go forward, we need to take bold action. That,
by the way, is true with wind as well. In my State, I have to
tell you, there is overall sentiment for wind. But people say,
hey, we don't want to look at wind turbines.
Sorry. If we are serious about breaking our dependency on
foreign oil, we are all going to have to do something maybe
that we are not 100 percent for.
Senator Domenici [continuing]. It may save time.
The Chairman. OK. Let me just briefly introduce the rest of
our witnesses here.
Charles Andraka is with Sandia National Labs. We appreciate
you being here. He is going to give us an overview of this
technology and how it compares with others.
Fred Morse is with Abengoa Solar, headquartered out of
Spain, I believe, but very much sort of a leading provider in
this area.
Mike Daly is right here with Mesa del Sol and is going to
talk about their efforts to create solar power capability here
at Mesa del Sol.
Alex Marker is with Schott Solar, which, of course, is in
the process of building their production or manufacturing
facility in Mesa del Sol, and we are very excited about that.
He is going to talk about what they see as the prospects for
concentrating solar.
Fong Wan is representing Pacific Gas and Electric, and they
have been a leader in the use of solar energy technology. He is
here from San Francisco. So we really appreciate him coming
very much.
Mr. Andraka, why don't you start off and give us 5 or 6
minutes? Then we will just go down the line and hear from all
of you, and then we will have questions.
STATEMENT OF CHARLES E. ANDRAKA, SANDIA NATIONAL LABORATORIES,
ALBUQUERQUE, NM
Mr. Andraka. Thank you. Good morning, Senators.
My name is Charles Andraka. I am a distinguished member of
technical staff at Sandia National Labs, and I have worked as
an engineer in concentrating solar power, or CSP, for the last
23 years.
CSP, as you know, uses mirrors to concentrate sunlight to
create an intense heat to drive a conventional engine or
turbine. Why CSP? First of all, CSP is highly scalable. It is
built with glass and steel, similar to our automotive and
building industries. CSP makes grid-ready AC power because of
the rotating machinery involved.
CSP is proven technology with over 400 megawatts of CSP
deployed and operating in the Southwest United States at this
point. CSP can incorporate storage. This allows smoothing of
short-term transients as well as shifting the peak to match
utility needs.
CSP can be hybridized to burn natural gas or other fossil
fuels for firming capacity. CSP is efficient with a world
record efficiency of 31.25 percent conversion of sunlight to
grid-ready electricity in a commercial installation.
I want to talk about the potential for CSP or why CSP now,
why the big interest? First, the Southwest U.S. has an
incredible resource. We like to call this ``the Saudi Arabia of
solar energy.'' We have identified in easily reachable
resources nearly 7 terawatts of generating capacity. That is
about 7 times the current electric-generating capacity in the
entire country.
The second area is the renewable portfolio standards,
particularly in the Southwest United States. There is a large
amount of solar needed to meet these standards, and the ramp-up
rate can be met with CSP technology as part of a renewables
portfolio. This would be combined with wind, PV, geothermal,
and hydro.
Third is the current public interest in CSP. This is driven
by the current energy situation as well as concerns about
global warming.
Finally, the DOE laboratories' development over the last
few decades has led to an unprecedented technology readiness
for deployment of these plants. This has led to a current
publicly announced deployment plans of 3 to 4 gigawatts of
power, and that is equivalent to 6 to 8 new coal plants. Many
more plants are in the initial planning stages.
I want to talk a little about the barriers to CSP
deployment. The first is financial risk. As you know, these are
large capital expenses rather than fuel costs distributed over
the life of the plant. So there is financial risk up front, and
there is technology uncertainty, particularly with the towers
and dishes. The troughs have less of that uncertainty because
of the deployed projects. The ramp-up to manufacturing at a
high rate is needed to reduce the cost. So there is that
chicken and egg syndrome.
The second barrier is taxation policy. The capital expenses
on these plants tend to be taxed as property. California, as
well as other States, waives the property tax on these systems
and is leading the way in this area. The longstanding 10
percent ITC and other considerations level the taxation on an
energy basis with conventional power generation. However, the
30 percent ITC would help overcome some of the initial
financial risk.
The bottom line on the taxation policy is we need long-term
financial policy stability for these plants to go forth. You
have already mentioned the time it takes to permit. If the ITCs
run out during that time, it is hard to get financing for these
plants.
The third area has already been mentioned, and that is
transmission capacity. This is the greatest consideration we
are facing when siting new plants. We find we are not in the
energy generation business, we are in the transmission business
when we are trying to site these plants. The capacity of a
current transmission grid is much smaller than the plants that
are proposed and on the books at this point.
Senator Domenici. What is that?
Mr. Andraka. The capacity of the existing transmission grid
is much smaller than the plants that are already on the books,
these 3 to 4 gigawatts worth of plants.
Finally, the final barrier is the approval processes. The
Federal, State, local, and utility processes are often
cumbersome. There is nothing in place for the current onslaught
of solar plants. The codes and standards need development. The
local authorities are scrambling, trying to find a consistent
code to apply to these plants because there is nothing out
there like this.
I want to talk a little about the laboratory role. The
laboratories play a critical role in facilitating the rollout
of the concentrating solar power technologies into the
marketplace. We are working hand in hand with industry right
now. We also continue to play a critical role in the
development of advanced systems with lower costs and higher
performance.
We see a three-prong approach for laboratory involvement. A
key effort right now is commercial development support, where
we leverage the incredible laboratory experience to assist the
commercial companies technically.
The second area is supply chain development, where we need
to identify and exploit synergistic supply chains, such as the
automotive industry. Along with supply chain development is
supply chain development of personnel. We need to increase our
involvement with universities and increase our internship
programs.
A third area that the labs need to be involved in is
revitalization of advanced development of CSP technologies.
This leads to new technologies with step cost reductions, not
just the manufacturing quantities. We need to do, as the
laboratories of things industry doesn't even know they need
yet. We have a significant track record over the last decade of
identifying those areas, developing technologies, and those
technologies are now being used by industry.
In summary, CSP has the potential to meet a large fraction
of our energy needs in a portfolio with other leading
renewables. The easy-to-reach resources in the Southwest are
capable of 7 times the current generating capacity of the
United States. CSP leverages existing U.S. manufacturing
capabilities. Current market drivers have led to unprecedented
interest in CSP.
Deployment acceleration requires improvements in taxation,
regulatory, and approval processes and policies. The support of
the national laboratories has been and will continue to be
crucial to the success of commercial CSP projects. Continued
industry support, supply chain development, advanced technology
research, and stable policies will allow us, as a Nation, to
take advantage of the tremendous energy resource identified in
our own backyard.
Thank you.
[The prepared statement of Mr. Andraka follows:]
Prepared Statement of Charles E. Andraka, Sandia National Laboratories,
Albuquerque, NM
INTRODUCTION
Concentrating Solar Power (CSP) describes a suite of solar
technologies that use mirrors and thermodynamic processes to develop
grid-ready electricity. Mirrors on tracking structures concentrate
sunlight, producing high temperatures, which then drive conventional or
novel engine cycles that in turn drive a generator to develop
electricity. CSP technologies do not depend on strategic or high-tech
materials, but rather are based fundamentally on glass and steel
structures. The collected energy can be stored as thermal energy--an
inherent advantage of CSP over photovoltaic solar and wind electrical
generation. While CSP technologies are not as recognizable as
photovoltaic power (PV) technologies, there are nearly 450 MW of CSP
generation currently operating in California and Nevada, with
additional planned deployments of over 3000 MW in the Southwest United
States.
CSP has the potential to supply a large fraction of the energy
needs of the United States, although prime generation sites exist
primarily in the Southwest. Working in conjunction with other renewable
resources established in other parts of the country, and with
improvements to the grid infrastructure, the future of CSP in the
nation's energy portfolio is indeed bright. The current cost of
electricity generation by CSP trough plants is about $0.16/kWh. Other
CSP technologies may produce lower cost electricity due to higher
system efficiencies. With further technology development and increased
deployment, the cost of CSP-generated electricity projected in several
studies to reach $0.06/kWh. In addition, the high-temperature
capabilities of CSP make possible highly efficient chemical processes
that can lead to solar fuels production.
The DOE national laboratories, specifically Sandia National
Laboratories and the National Renewable Energy Laboratory (NREL), have
played a crucial role in existing CSP deployments, and we continue to
work closely with industry to optimize and improve the designs and
plans for upcoming deployments. The historical and ongoing technical
achievements at the laboratories have been and will continue to be a
cornerstone of successful cost reduction, performance enhancement, and
deployment success. Key laboratory-developed technologies are deployed
to the field by industry. The test capabilities at Sandia are unmatched
worldwide, and provide a great resource to industry partners.
CSP DESCRIPTION
CSP converts the sun's energy into heat and then uses that heat to
power an engine-generator unit. The sunlight is concentrated with
mirrors--similar to concentration by a magnifying glass. The resulting
heat is intense enough to create steam to drive a conventional turbine
or to heat a working fluid in a smaller engine, similar to burning
gasoline in an automotive engine. CSP technologies are large-scale,
providing utility-scale generation of power, with near-term planned
plant sizes ranging from 100 to 1000 MW. (A typical coal or nuclear
plant may be 500-2000 MW.) CSP consists of three basic technologies:
(1) parabolic troughs, (2) power towers, and (3) dish-engine systems.
Each of these technologies uses a parabolic array of mirrors, on
different scales, to create intense heat.
CSP is already being deployed, with 384 MW of capacity in nine
plants in California and a new 64 MW plant in Nevada. Combined, these
plants represent more than 140 plant-years of commercial operation. The
national laboratories have continued to develop the CSP technology and
have also helped improve the deployed plants. In 1998, the nine plants
in California increased their rated capacity from 354 MW to 384, in
part because of performance and operations and maintenance improvements
pioneered by the laboratories. Over the last two decades, new
deployments have been limited by the relatively low cost of electricity
generation by natural gas. The recent dramatic increases in fuel cost,
coupled with the Renewable Portfolio Standards (RPSs) in some states,
have driven renewed interest in CSP deployment. The addition of the 30%
Investment Tax Credit (ITC), as opposed to the 10% level, offsets some
of the financial risks inherent in initial scaled-up deployments.
A key advantage of CSP is dispatchability (that is, the ability of
a generating unit to increase or decrease generation, or to be brought
on line or shut down at the request of a utility's system operator).
Because the energy conversion process is a thermal action, the solar
input can be supplemented in two ways. The first is through thermal
storage, in which a working fluid is stored hot and then used when
needed to drive the turbine. This process is very efficient, with over
98% recovery. The second is that systems can be ``hybridized''.where an
alternate fuel such as natural gas can be burned to supplement the
solar collection. This method is not as desirable as storage, but it
does present an option that photovoltaic and wind energy sources do not
provide.
A second advantage of CSP is the inherent ``low tech'' of the
materials involved. The collection structures are typically steel or
aluminum, with glass reflector surfaces. The resulting structures have
been likened to ``a funny-looking car.'' Indeed, several industry
partners who work with Sandia have already leveraged the manufacturing
capabilities of the Detroit-area automotive companies, as well as other
basic American manufacturing companies.
TECHNOLOGY DESCRIPTIONS
Parabolic Troughs
The parabolic trough system is a line-focus mirror array, as
opposed to a point focus system. At the focal line, a specialized tube
carrying a working fluid (such as a thermal oil or a molten salt) is
heated. The working fluid reaches temperatures in the range of 500C.
The collected heat can then be stored or directly passed through a heat
exchanger to generate steam for a conventional turbine.
This technology is the most widely deployed CSP approach, and
existing deployments help in obtaining funding and approvals for new
installations. The state-of-the-art systems are solar-only (no
storage), with an annual efficiency in the 12-14% range and a peak
efficiency of about 16-18%. Typical plants in the past were sized under
50 MW due to power purchase agreement limitations. The newest plant, in
Nevada, is a 64 MW installation. Proposed plants for Arizona are as
large as 280 MW with storage. The larger size plants bring down the
cost of the electricity generated through economies of scale.
Current trough research includes thermal storage development and
testing, higher temperatures (which leads to higher performance), and
lower cost designs. Key laboratory optical modeling and systems
development approaches are helping industry to reduce costs without
reducing performance.
One key component of trough systems is the receiver tube, a glass
and metal structure that includes some laboratory-developed sealing
technology. The Schott Solar Company is planning to build a plant in
Albuquerque to fabricate this critical component.
Dish Engine Systems
Dish-engine systems consist of a tracking dish that concentrates
sunlight to a single point, and a heat engine at that point which
converts the intense heat to electricity through a rotating shaft and
generator. Current designs center on a Stirling cycle engine, which is
similar in many respects to automotive engines. Dish systems currently
range from 3 to 25 kW capacity each, although larger systems are
envisioned by some companies. Most companies currently developing dish
systems intend to deploy fields of dishes, with aggregated capacities
up to 1000 MW (for example, 40,000 25 kW dishes in one field). This
deployment approach is seen as key to cost reduction.
Because of the point focus at each dish, the dish system is capable
of very high temperature operation, typically in the 800C range
(glowing red to orange). These high temperatures lead to very high
system efficiencies for conversion of sunlight to grid-ready
electricity. The current world record solar conversion efficiency is
31.25%, held by the Stirling Energy Systems 25 kW Dish-Stirling system
located at Sandia National Laboratories. The annual efficiency of such
a system is in the range of 22-25%.
Stirling Energy Systems has announced two large power purchase
agreements in California. The first is with Southern California Edison
for the energy from a plant with 20,000 dishes producing 500 MW, with
potential expansion to 850 MW. The second is with San Diego Gas and
Electric for the energy from a 12,000-dish system producing 300 MW,
with possible expansion to 36,000 dishes and 900 MW. With recent
investment, the prognosis for successful deployment is very good.
Current efforts in dish-engine deployment center on cost reduction
and large-scale manufacturing. The role of the national laboratories in
this effort is in technology transfer and design support. In
particular, as non-solar entities are engaged to provide manufactured
parts and systems, Sandia's experience is leveraged to be sure that
solar performance is not compromised. Additional development is
centered on alternate engine advancement that could lead to lower
operation and maintenance costs. The large number of dishes deployed in
single locations help ramp up the production rates, which also leads to
lower costs.
Power Towers
The power tower is also a point-focus technology that allows for
higher temperatures than those in trough systems. In the tower system,
a field of steerable mirrors reflects the sun's energy to a large point
at the top of a tower, where a working fluid is heated and then either
stored or directly used to drive a conventional turbine. A commercial
power tower is likely to be sized in the range of 100 MW electrical
output, although both smaller and larger plants have been proposed.
Tower systems can directly generate steam at the receiver location
to drive a turbine. Such plants, on a 10 MW scale, have been
demonstrated in Spain, where they have achieved annual efficiencies in
the 12% range. A second approach is to heat a molten salt working fluid
to a higher temperature, then store this hot salt until the generation
of electricity is needed. A small-scale pilot plant, operated in the
1990s, demonstrated the feasibility of this approach. Larger molten
salt plants are expected to lead to 18-20% annual efficiency. The
higher temperatures of the tower systems make the possibility of
thermal storage more economically feasible than with trough systems.
Although no US power tower plants are currently in production or
deployment, several US companies have recently announced plans to
pursue and develop various power tower technologies. Additional
research and development will concentrate on cost reduction of the
tracking mirror systems (development which is likely to support all the
CSP technologies) and on the development of robust, efficient receiver
assemblies.
Storage
Thermal storage of energy is unique to the CSP technologies, and it
represents a significant advantage over other intermittent renewable
technologies such as wind and photovoltaics. The large-scale storage of
thermal energy is highly efficient, with over 98% recovery of stored
energy. (Compare this to the battery storage of electricity, typically
in the 60-70% range.) In addition, the storage containment equipment
and fluids are quite cost effective compared to batteries, and they are
more environmentally benign.
The thermal storage uncouples the collection and generation phases
of the CSP cycle. Energy can be collected throughout the day, with
actual generation of electricity deferred until needed (for example,
evening peak periods). With enough storage, CSP technologies will be
able to provide baseload (continuous, around-the-clock) power
generation in the future. In the shorter term, storage can firm up
capacity during peak parts of the day as well as shift the generation
to better match the utility's needs. Some utilities (for example,
Arizona Public Service) have indicated they will not consider solar
technologies without storage, as their peak period extends well into
the evening. Other utilities do not see the need for storage in the
immediate future, but begin to see the need as renewables reach toward
20% of the regional generating capacity. The use of substantial storage
will allow CSP to provide greater than 20% penetration in the electric
generation arena.
Trough and tower technologies are well suited to molten salt
storage, a technology demonstrated in the 1990s on the Solar 2 pilot
plant in Barstow, California at a 10 MW electric generation level. The
demonstrated systems used a nitrate salt (which is essentially
fertilizer) to collect and store the heat. Sandia National Laboratories
is presently examining salts with the potential for a lower melting
point (reduces parasitic loads and losses) and a higher operating
temperature (improves total system efficiency). Sandia is also testing
components and materials for durability in long-term exposure to the
salt working fluids.
DEVELOPMENT NEEDS
The current public interest, high energy prices, and state
renewable portfolio standards are driving unprecedented interest in CSP
technologies. Deployment proposals and plans, as well as private
investment in solar technologies, have grown exponentially over the
past few years. More than 3000 MW of known Power Purchase Agreements
(PPAs) are now on the books, with many more reported to be in progress.
These deployments are investor-driven, so risk must be minimized to
support return on investment. The national laboratories are continuing
to play a key role in technology deployment and personnel training. The
accumulated knowledge and experience in the laboratories is being
leveraged through partnerships, Cooperative Research and Development
Agreements (CRADAs), and other mechanisms. This leveraging helps the
commercial sector deploy effective technologies and minimize the waste
of capital investment. However, the laboratories also need to revive a
research and development role that will develop next-generation systems
with the potential to meet long-term cost targets.
Support and development needs lie in three key areas. First,
continued technical support of near-term commercial deployments is
needed to leverage the DOE investment in CSP development. Second,
supply chain development is necessary to bring US industry capabilities
to bear on this key strategic resource. Third, the laboratories must
continue advanced development, leading the CSP technologies to more
cost-effective solutions that bring us to mainstream power generation.
Industry technical support has been and continues to be the
cornerstone of the laboratory involvement with CSP. Tools, methods, and
technologies developed at the laboratories are directly responsible for
the feasibility of the proposed deployments, as well as for ongoing
improvements of operational systems in the field. The CSP personnel
base at the laboratories has been very stable when compared to other
missions of the laboratories, providing a continuity and experience
base unmatched anywhere in the world. We have demonstrated an ability
to provide significant value to industry partners during design,
development, testing, and qualification phases of these technologies.
However, there are limited ``experts'' in the solar field, so the rapid
expansion of CSP firms has led to a severe shortage of engineers with
solar experience. Working hand-in-hand with the laboratories has proven
a viable method to add to the ``solar expert'' ranks. Sandia National
Laboratories has also made use of its expertise in other areas of the
laboratory, including manufacturing, failure analysis, materials
research, Supervisory Control and Data Acquisition (SCADA) system and
controls development, information security, and systems engineering.
With the large planned deployments, this aspect of CSP development is
reactive to industry needs.
Supply chain development provides for a transition of US
manufacturing capabilities to these new technologies. The CSP
technologies are presented to potential cross-cutting suppliers to
develop a manufacturing resource for use across the CSP spectrum. This
approach allows the leveraging of existing US nonsolar suppliers,
particularly in the automotive sector, rather than reinventing the
manufacturing wheel. This approach has proven successful in several
areas for the Stirling Energy Systems team. The engine is being
``productionized'' by a Detroit engine production firm. Very
significant enhancements have been proposed that will reduce the cost
of the engine, increase reliability, and improve the performance
potential. There are unique capabilities in American industry,
developed for other sectors, which will impact all areas of the CSP
designs. Supply chain development also includes development of solar
engineers through development of university programs and curricula.
This aspect of CSP development must be cooperative with industry to
leverage both laboratory and industry experience.
The laboratories must revitalize a thrust in advanced development
for CSP technologies. Rapid deployment and substantial private
investment make the CSP industry partners focused on near-term sales
and deployments. Thus the laboratories must continue to develop next-
generation systems, components, and tools. Industry is neither able to
take on the risk of advanced development nor the distraction it would
inject into the deployment process. Although industry has proposed
approaches that will initiate large deployments, laboratory technology
breakthroughs will lead to cost reductions that will make CSP
technologies cost-competitive with conventional fossil-fuel power
generation. The laboratories need to focus on development of disruptive
technologies that will impact the cost and performance of CSP systems.
Increases in system performance (efficiency) will directly impact
electricity generation costs because the majority of the cost in these
systems is in the collection apparatus (steel and glass). The
laboratories must be proactive in the development of advanced
technologies.
The laboratories have often developed new approaches that industry
did not anticipate. These approaches often become part of the baseline
technology that industry is prepared to deploy. Sandia has developed
closed-loop tracking sensors and algorithms that substantially reduced
the assembly accuracy requirements of dish systems. Rather than
``perfect'' installations, the closed-loop sensors and algorithms allow
the system to learn and adapt to any imperfections, resulting in a
substantial reduction in installation costs. Sandia-developed mirror
facets have a substantially higher accuracy than prior ``commercial
grade'' facets, and for about the same price. This development has
changed the entire design paradigm for point-focus systems, as the
improved performance has a substantial effect on the cost of
electricity generated. These improvements are now entering the
parabolic trough arena as well: Sandia-developed heat pipe receivers
demonstrated a 20% improvement in system performance on one Dish-
Stirling system. Further development is expected to bring this
disruptive technology to the market. Systems models, tools, and
development hardware have led to a better and more realistic
understanding of system performance and costs. Spin-off technology and
algorithms from Sandia's Advanced Dish Development System (ADDS) are
being incorporated into the near-commercial products of Stirling Energy
Systems, Infinia Corporation, and Eurodish. Sandia's new ``TOP''
(Theoretical Overlay Photographic) alignment system for troughs has
demonstrated the benefit of optical alignment of existing trough
plants, and it provides a tool to economically perform the alignment.
The high temperatures possible with the point focus systems (dishes
and towers) make possible high-temperature chemical processes for the
development of transportation fuels. Several processes have been
proposed and are under development for splitting water using high-
temperature processes, creating a reliable and cost-effective stream of
hydrogen. Similar processes can be used to split CO2 into CO
and O2. The CO can then be easily combined with hydrogen to
create liquid fuels, which can then be distributed using the existing
fuels infrastructure. The CO2 could be supplied from
sequestration at coal plants or, in the long run, through atmospheric
scrubbing.
CSP MARKET POTENTIAL
CSP technologies are enjoying unprecedented interest and
development, both in the US and worldwide. This interest is driven by a
variety of factors creating something of a ``perfect storm.'' Respected
US and international companies are entering the CSP field, and
significant private investment is flowing into CSP. In the US, there is
significant solar resource in the Southwest states, primarily in areas
with otherwise undesirable land.
Market Drivers
A variety of drivers have led to the current unprecedented
commercial interest in CSP. The first is the Renewable Portfolio
Standards (RPSs), primarily in the Southwest states, that mandate
certain significant percentages of electricity generation must come
from renewables. Although wind power has made significant deployments
driven by the RPSs, utilities particularly like solar because of the
match of the generation profile to the load profile. Therefore, as
renewables have started to provide a notable fraction of the energy in
some regions, the utilities have desired to balance wind generation
with solar generation.
The second driver is the rapid and recent increases in fuel costs
for conventional power generation. This factor is particularly
applicable to natural gas plants, which were installed as ``peakers''
when natural gas was abundant and cheap just a few years ago. Currently
the costs of CSP generation are very competitive with peak natural gas
generation, even at relatively small deployment levels.
Third, the cost of all energy, especially gasoline, has driven
public sentiment and support for solar energy. Not only is solar seen
as a stable, US-grown energy source, but it is also ``green,''
satisfying additional public sentiment concerning global warming and
greenhouse gasses. The extraordinary public interest is demonstrated to
me each day as I field numerous calls from the media and private
citizens.
Finally, the investment by DOE and private industry over the last
20-30 years has provided a level of technology readiness suitable for
significant investment in large deployments. Although technical and
financial risk is still apparent, the technical risk has been reduced
through the laboratory and cooperative projects, demonstrations, and
technology development. Modern design, manufacturing, and analysis
tools applied to CSP allow rapid movement from concept to feasible
hardware while reducing costs and risk.
Solar Resource
Presently, CSP technologies require approximately 6 acres per MW of
installed capacity, compared to non-tracking PV at nearly twice that
requirement. This translates to a 500 MW plant using about 5 square
miles of desert land. CSP technologies require ``direct normal
insolation,'' which is a measure of the brightness of the light coming
directly from the sun, rather then reflected off clouds and sky.
Therefore, CSP technologies work best in clear, dry environments like
the Southwest United States. Figure 1* shows the tremendous resource
available in the southwest states of New Mexico, Arizona, California,
and Nevada, with some areas in Colorado. Obviously not all of this land
is available for CSP deployments.
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* Figures 1-4 have been retained in committee files.
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An NREL study filtered this data to exclude land already in use,
environmentally and culturally sensitive land, and land with
significant slopes. The remaining lands were only considered when
contiguous areas were greater than 10 km\2\ (or 4 mi\2\) and a solar
resource over 6.75 kwh/m\2\/day. Figure 2 shows the filtered data. If
the minimum direct normal considered is 6.0 kWh/m\2\/day, a still very
good resource, considerable additional land becomes available,
particularly in the State of Utah.
Although the vast majority of prime land has been filtered out,
there are still more than 53,000 mi2 of land available for CSP
projects. Table 1 shows a breakdown of potential land, filtered as
noted, on a state-by-state basis. This analysis shows an available
resource that is 7 times larger than the total nameplate generating
capacity of the US electric grid. These data and maps are available
from the Renewable Resources Data Center at NREL.
CSP Cost
Renewable resources are best compared on the basis of ``Levelized
Energy Cost'' (LEC). This is the present value of the total cost of
building and operating a generating plant over its entire economic
life, which is then spread across all the energy generated during the
life of the plant, resulting in an average cost per kWh of energy
produced in present-day dollars. CSP plants do not have ongoing fuel
costs, which represent a significant fraction of the LEC of electricity
from conventional fueled plants. However, the CSP plants are highly
capital intensive, essentially buying 20-30 years of fuel up front in
the form of collection equipment. Therefore, the LEC of CSP energy is
highly dependent on financing and tax structures, as well as the rate
of production of the equipment being fielded. The value of CSP is
impacted by the cost, but also by environmental considerations that may
or may not have a financial value, such as carbon footprint. Policies
in this area can impact the value of CSP substantially. The cost of
conventional generation is influenced by the current high cost of
fuels, which also helps the relative value of CSP.
Figure 3 shows the anticipated LEC reduction for CSP projects
compared to the cumulative deployment of CSP projects. This projection
is taken from the Western Governors' Association (WGA) Solar Task Force
Summary Report of January 2006.\1\ This model uses a trough plant with
6 hours of thermal storage as a surrogate for all CSP technologies, and
includes continuation of the ITC. Significant reductions in cost are
expected through manufacturing improvements resulting from the sheer
volume of deployed concentrators. However, significant supporting
policy and financial assumptions are included as noted in the figure.
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\1\ Report available at: http://www.nrel.gov/csp/troughnet/pdfs/
kearney_wga_overview.pdf.
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Private industry is leading the way on current deployments. As
expected, the exact terms of the contracts with the utilities are
closely held secrets, so it is difficult to obtain accurate current
costs of CSP generation. However, the 2003 Sergeant and Lundy report is
an excellent resource on the prognosis for cost reduction of trough and
tower systems.\2\
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\2\ Sergeant and Lundy LLC Consulting Group, ``Assessment of
Parabolic Trough and Power Tower Solar Technology Cost and Performance
Forecasts'', Chicago, IL: NREL/SL-5641, October 2003.
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This report is scheduled to be updated to include modern technology
improvements and financial considerations, and extended to include the
dish-engine systems.
The current LEC for trough plants is estimated at $0.16/kWh.
Industry experts have indicated that near-term deployments can be
expected to produce an LEC in the $0.12/kWh range (DOE semi-annual
review conference, Austin TX, April 2008). Further technological
developments and very large deployments are needed to reach the
predicted $0.06/kWh range. Several trough manufacturers have also
indicated that the near-term deployments planned are highly dependent
on a stable ITC policy.
The contract price for Stirling Energy Systems dish-system
electricity is also a closely protected corporate secret. However, if
one reviews current policy in California, it is clear that the base
price for these near-term plants is likely at or below $0.10/kWh.\3\
The high efficiency of the dish-engine technologies makes $0.06/kWh a
feasible target. Again, the LEC is strongly impacted through large
deployments leading to highly automated manufacturing. In addition,
successful early deployments will lead to more favorable financing
terms for later deployments, similar to the pattern seen in trough
deployments.
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\3\ California CPUC Resolution E-4118 Adopting the 2007 MPR (Market
Price Referent), 4 October 2007. Document available at: http://
docs.cpuc.ca.gov/published/Final_resolution/73594.htm.
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No large tower projects in the US are far enough advanced to
evaluate modern costs. However, the Sergeant and Lundy report indicates
that towers can reach the range of $0.055/kWh. Towers have the inherent
advantage of simple storage combined with higher temperatures than
troughs, leading to higher efficiency and therefore lower cost.
The current energy environment is encouraging substantial interest
in CSP. More than 3000 MW of deployment has been announced in the
Southwest United States, and additional large deployments are in the
planning and exploratory stages. Table 2 lists the publicly announced
deployments planed for the Southwest US. In the near term, we expect an
ITC extension would facilitate these deployments and accelerate the
cumulative deployment of CSP in the United States.
Figure 4 shows the expected impact of ITC extensions on the near-
term deployment of CSP technologies, based on NREL projections
published in the 2008-2012 Multi-Year Program Plan.\4\ These plants
take a number of years for design and development, permitting, and
financing. Thus the importance of a stable, long-term taxation and
credit policy cannot be stressed enough.
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\4\ Department of Energy Solar Energy Technologies Program, Multi
Year Program Plan, 2008-2012, April 2008. Plan available at: http://
www1.eere.energy.gov/solar/pdfs/solar_program_mypp_2008-2012.pdf.
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In summary, the cost of CSP is likely to be competitive with
conventional generation processes. The cost reductions will come
through a combination of technology improvement (performance
improvement), design for manufacture (cost reduction through design),
volume manufacturing (cost reduction through automation and stable
factory orders), favorable financing (through investor confidence) and
equitable taxation (recognition that the capital investment is
comparable to fuel investment in a conventional plant). In the short
term, the ITC will promote deployment to accomplish these cost
reductions.
Market Barriers
While we enjoy an unprecedented renewal of interest in CSP, there
remain several market barriers. If these barriers can be addressed, CSP
deployments will accelerate more rapidly, moving the balance of our
energy infrastructure toward a sustainable domestic resource.
The first barrier is financial risk. CSP plants are not consumer
items; rather they are very large industrial complexes. The up-front
cost is high, and it is paid back over long periods of successful
operation. The lack of large deployments, particularly in dishes and
towers, leads to uncertainty and therefore a higher cost for financing
these projects. As plants are deployed, the financial risk is reduced,
and the cost of financing is proportionally reduced. The current very
high interest in troughs in part results from the ability to finance
these projects based on the success of the over 400 MW in the Southwest
United States. This is one area where the ITC can significantly reduce
the cost of the plant to offset the high cost of financing due to the
perceived risk.
Similarly, taxation policies impact the financial feasibility of
CSP plants. The high amount of capitalization results in a significant
tax burden when compared to conventional-fuel power plants. A state
policy to exempt these plants from property taxes will help level the
playing field, making CSP competitive with conventional technologies.
As we work with companies in planning large deployments, we find
that available transmission capacity is a much larger consideration
than land cost. Despite high public interest in renewable energy, the
public tends to be very opposed to new transmission capacity. A good
example is the Sunrise Powerlink, proposed by San Diego Gas and
Electric. Current transmission capacity can handle the introduction of
the 300 MW Stirling Energy Systems dish-engine power plant in the
Imperial Valley. However, the proposed extensions will need the Sunrise
Powerlink, which is currently opposed by several activist groups.
Beyond California, if we anticipate the Southwest United States
supplying CSP-generated power to large portions of the country,
substantial changes to the nation's electrical grid will need to be
considered. Any new large-scale transmission lines will also face
challenges in ensuring minimal environmental impact.
Many of the proposed plants are on federal government land,
primarily BLM land. The permitting process for these lands, though
necessary to protect various national interests, is a cumbersome and
slow process. The shear size of these plants, several square miles
each, presents unique environmental approval challenges that must be
considered in detail. Streamlined permitting and approval processes for
lands in the ``CSP hotspot'' could accelerate development and
deployment.
BLM recently announced a two-year freeze on new solar projects on
BLM land while they study environmental impacts.\5\ This freeze forces
the consideration of environmental impacts to be performed in series
with other site considerations, rather than in parallel, effectively
delaying new installations by another two years. A coordinated federal
streamlined permitting process could significantly shorten the process
leading to deployment, rather than the current patchwork approval
process that adds significant delays.
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\5\ Frosch, Dan. ``Citing Need for Assessment, U.S. Freezes Solar
Energy Projects,'' New York Times, 27 June 2008. http://
www.nytimes.com/2008/06/27/us/27solar.html
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Beyond the land-use permitting, site development and planning takes
years in order to meet many state and local requirements. The
technologies are substantially different than conventional technologies
from a utility perspective. This is particularly true with systems that
do not incorporate storage. Large intermittent sources have not been
previously addressed by the utilities, so there is substantial
uncertainty. There are no applicable codes and interconnect standards
for such systems. All these significant technical and policy issues
slow the approval process and add financial uncertainty to the project
developer. We need sustainable energy policies, economic conditions,
and permitting processes that motivate private investment in new
technology deployment.
CONCLUSIONS
CSP has the potential to meet a very large fraction of our nation's
energy needs, starting with grid-based electricity and expanding to
transportation fuels production. The resource available in the
Southwest United States on easily useable land is nearly 7 TW, or 7
times the current electrical generation capacity of the US. Cost-
effective and efficient storage sets CSP technologies apart from key
intermittent renewables of photovoltaic solar and wind. This is
especially important as intermittent renewables begin to generate
significant fractions of our national energy supply.
CSP leverages existing US manufacturing capabilities. The
fundamental building blocks of CSP are glass and steel, materials
common to the automotive and building industries.
Current market drivers--including global climate change, high fuel
prices, and technology readiness--have led to unprecedented interest in
CSP technologies. A number of US and International companies are poised
to deploy large CSP plants in the Southwest United States.
Significant deployment acceleration requires policy improvements,
including a stable taxation and regulatory environment and streamlined
land use and interconnect approvals and policies.
The support of the national laboratories has been crucial to the
technical success of CSP projects, and the laboratories' role will not
diminish with the advent of large deployments. The partnerships
developed between the laboratories and industry have been extremely
valuable in the feasibility and success of new CSP deployments.
Although the technical support of the deployments is critical, the
laboratories also need to promote supply chain development leading to
cost reduction, and they need to enhance long-term research and
development of disruptive and advanced technologies that will
dramatically impact the cost and performance of future plants.
Continued industry support, supply chain development, advanced
technology research, and stable policies will allow us as a nation to
take advantage of this tremendous energy resource identified in our own
backyard.
The Chairman. Thank you very much. Appreciate that.
Mr. Morse, go ahead and give us your view from Abengoa.
STATEMENT OF FREDERICK H. MORSE, SENIOR ADVISOR, U.S.
OPERATIONS, ABENGOA SOLAR, INC.
Mr. Morse. Senators, thank you very much for inviting me to
speak to you today on this very promising technology, CSP.
My company, Abengoa Solar, which has its U.S. headquarters
in Denver, designs, builds, owns, and operates CSP plants
around the world and would love to do the same in the United
States.
As you mentioned, Americans are very concerned about their
future. Energy prices are going up to unexpected levels, fears
of recession, job losses, climate change issues. This CSP
technology, as you have all acknowledged, is right in front of
us, and it could be part of an energy, economic, and
environmental solution. I think it should play a major role in
our energy portfolio.
Charles mentioned what CSP is. I won't comment on that. But
I will say it is bursting at the seams to come out on the
Southwest utility market. Over a dozen companies are spending
their own money to develop this technology without a Federal
penny. Eight of them have signed contracts for over 4,500
megawatts, signed contracts. That could be instead of 4 to 6
coal plants or gas plants. These 4,500 megawatts could power
over a million homes.
The utilities--and we just heard from PNM there, and we
will hear from PG&E--they want to add CSP to their mix now, not
tomorrow--now. The resource potential of the Southwest, your
State and others, dwarfs the Pacific Northwest hydro resource.
If it were oil, we would be racing to develop this. It can play
a major role for the Southwest and the United States.
I can't resist. So I have to say there is one thing that
stands in the way, and that is the immediate 8-year extension
of the ITC. I will comment why. If that doesn't occur, New
Mexico will lose. I think the facility that we heard about
today will not get built. The Southwest will lose, and America
definitely will lose. Without the 8-year extension, this
industry will be stopped dead in its tracks.
With the extension of the ITC, I will state that there are
no major barriers--there are problems--no major barriers for
CSP to enter the utility market. Of course, there are other
things the Federal Government can do--help with transmission,
BLM we heard, siting issues, R&D support. Those are all in my
written testimony.
The contracts signed to date, those 4,500 megawatts, are
over $20 billion of investment. The investors are ready. They
are ready to make the investment. But without the ITC, they
cannot and they will not.
You asked about how long it takes to build a plant. I think
building the plant, a year and a half is a good number. But
permitting the plant could take another year or a year and a
half. You have to win a contract with, say, PNM and negotiate
that. You have to have a little pushing because the banks will
say what happens on the day you start the plant up if the
transformer blows and you need to buy another one? So that is
the reason for the 8-year extension.
The economic benefits from unleashing CSP are impressive.
Every dollar of tax credit will be multiplied many times by the
investment to the $20 billion I mentioned--purchases from
suppliers, wages from new jobs, and the flow through commerce
associated. Those contracts on the books, none of which will
happen--none of them will happen. My company has one, and we
can't get it financed without the ITC--is 25,000 construction
jobs. The manufacturing jobs, like the Schott plant and others,
will all happen with the ITC.
I am going to close with an example. We negotiated a
project with Arizona Public Service for a 280-megawatt plant
with 6 hours of storage. This plant will deliver energy well
past sunset while the peak is still there. It will power 70,000
homes. It is carbon free. It is on figure 6 in my written
testimony. APS sees this as the first of many. If they can't
get this plant built, they will go back to natural gas, I
predict.
So America has an enormous domestic resource. It is ours.
It is carbon free, and it is forever. We have to develop it
because it creates jobs that cannot ever be exported, and the
resource adds security of supply with diversity and so on. But
we are risking that.
So my last word is CSP industry is ready with its money.
Wall Street is ready with its money. The States are ready with
their subsidies. All that is missing, I am sorry to say, is the
Federal extension of the ITC, and I hope maybe you two can find
a way to work out a deal. But if not, the industry is going to
be severely hurt.
Thank you very much.
[The prepared statement of Mr. Morse follows:]
Prepared Statement of Frederick H. Morse, Senior Advisor, U.S.
Operations, Abengoa Solar, Inc.
Senators Bingaman, Domenici and Sanders, thank you for inviting me
to speak to you today about one of America's most promising renewable
energy technologies--Concentrating Solar Power, or CSP. My company,
Abengoa Solar, develops, builds, owns and operates CSP plants around
the world and is also planning trying to do this in the United States.
Americans are deeply concerned over their future, with oil and
natural gas prices rising to unexpected levels, with fears of a
recession and loss of jobs, with reports that the concentration of
carbon dioxide in the atmosphere continues to increase, threatening
many adverse consequences. Importantly, the EPA has identified
electricity generation from fossil fuels as the single largest source
of domestic CO2 emissions.
But there is an exciting clean energy technology right in front of
us that can become part of the solution to America's energy, economic
and environmental challenges. The solution is Concentrating Solar Power
and it can and should be a part of our national energy portfolio going
forward.
CSP refers to a family of technologies that convert the sun's
thermal energy into steam to generate electricity with zero carbon
emissions. Some CSP technologies concentrate the sun and convert it
directly into electricity via an engine or photovoltaics located at the
focal point. Figure 1* shows the major CSP technologies.
---------------------------------------------------------------------------
* Figures 1-6 have been retained in committee files.
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CSP is most cost effective at utility scale (hundreds of MW) and
some CSP technologies can provide electricity, on demand, when it is
needed, and some can even produce electricity well into the night to
meet summer peak demand. Some CSP technologies are commercially
available and have been working reliably for over 20 years in the
Mojave Desert, where they have not failed to meet a single hour of peak
demand since they came on line--with the help of favorable tax
policies. Figure 2 shows the output from a portion of the 354 MW CSP
Plant.
It can be seen that when combined with natural gas to firm the
output, these plants had an on-peak capacity factor of over 100% every
year of their operation. Most current CSP plants now firm their output
using thermal storage to become ``pure'' solar plants. Utilities are
familiar with CSP and wish to add it to their energy mix. Not tomorrow,
but today.
CSP is a power system straining to burst onto the southwest utility
scene. Well over a dozen companies are developing CSP plants using
private--not Federal--funds, and eight have signed contracts with
utilities which total over 4,500 MW--equivalent to 4 large coal or
natural gas plants that will not have to be built. These 4,500 MW of
CSP plants will be able to power over one million homes. Because CSP
has attributes that utilities prefer (generates steam, comes in large
sizes and is dispatchable), more utility contracts are certain as the
cost of CSP declines relative to fossil-fuel generation.
The solar-rich Southwest can look forward to the day when a solar-
powered plant, not natural gas-fired or coal-fired generation, will be
a utility's first choice--irrespective of whether or not renewable
energy mandates exist. Because the CSP resource potential in the
Southwest exceeds the hydro potential of the Pacific Northwest, CSP can
become a major driver of the economy of southwestern U.S. and play a
major role in meeting the region's future energy needs and
environmental targets.
As the rays from the sun enter the earth's atmosphere, a portion
are scattered and absorbed by the moisture and particulates in the
atmosphere while some reach the surface directly. The unscattered
portion is called Direct Normal Insolation. Because CSP technologies
can only use the direct radiation, it is essential to know where the
level of that radiation is highest as that will be the best place to
locate a CSP plant, assuming the site meets other requirements. The
National Renewable Energy Laboratory has, over the past years, used
satellite date to map the solar resource in the United States. Figure 3
shows the distribution of Direct Normal Insolation in the southwestern
U.S. The darker the color, the higher the solar radiation and the
better for locating a CSP plant.
NREL then used GIS methodologies to filter out places where a CSP
plant could or should not be sited, such as cities, waterways,
environmentally sensitive areas, and mountains and slopes greater than
1 %. The resulting map is shown in Figure 4.
While most of the areas with high direct normal solar radiation
have been removed, what remains are the ``sweet spots'' for CSP in the
United States. The remaining areas represent the upper limit because
additional environmental restrictions may exist or be placed on their
use for CSP plants. Figure 5 shows the area and potential for CSP
generation on the areas shown in Figure 4.
It can be seen that there is ample land and potential in the
southwest to provide as much electricity as is needed and desired. And
the technology to use this resource, CSP, exists and is poised to enter
the utility market in large amounts.
However, one federal legislative action is essential if this new
wave of solar power plants is to happen: the immediate 8 year extension
of the 30% federal Investment Tax Credit or ITC. Without an 8 year
extension, this rapid growth of Concentrating Solar Power will not
occur and New Mexico loses, the southwest loses and America loses. Even
the 4,500 MW of signed contracts will be voided since their pricing is
contingent on the long-term availability of the ITC. Without an eight
year extension of the ITC now, the CSP industry will be stopped dead in
its tracks. Only the U.S. Congress can extend the ITC, and this is
something that has proved surprisingly difficult.
Why must the ITC be extended now? Because during the time since the
power purchase contracts for the 4,500MWs of CSP plants have been
signed, the price of steel has increased dramatically and similar
increases have been noted in the other commodities used for CSP plants.
Until the ITC is passed, financing is not possible and therefore it is
not possible to purchase the components needed to build the CSP plant.
Furthermore, the financial markets continue to be troubled, making debt
financing more difficult and costly. The longer CSP projects have to
wait, the more difficult it will be to adhere to the terms of existing
contracts and to finance these projects.
Aside from the extension of the ITC, there are no major barriers
facing CSP. If the eight-year extension is enacted, CSP will burst onto
the utility market. Of course there are other things that the Federal
government could assist the CSP industry with. For example, the BLM
should adopt a friendlier land policy for CSP, a process that is has
begun, thanks to an impetus provided by EPAct.2005 The BLM is now
identifying large tracks of federal land that are well suited for
siting CSP plants and will perform generic environmental studies. This
process needs to move along rapidly and with input from the CSP
industry, and needs to be adequately supported by the Congress. The
Federal government should provide stronger leadership in transmission,
as the lack of new transmission lines is affecting needed electricity
growth in many parts of the Nation. This same inattention affects
concentrating solar power as prime CSP areas lack connection to the
growing load centers in the southwest. Furthermore, the long time it
takes to build such lines will limit the rate and extent of the growth
of CSP in the market, underscoring the need for greater action in this
area. Finally, the CSP R&D program at DOE has been underfunded for many
years and that needs to be corrected to support the innovation needed
to help bring the cost of CSP electricity down.
The ITC could be thought of as a switch that if turned to ON and
left ON for eight years, it will open the CSP market and trigger the
building of CSP plants. The contracts signed to date with the utilities
will require an investment of around $20 billion, all private sector
dollars. And the investment community is ready to provide the needed
debt and equity to finance CSP plants, but only if the ITC is extended
for at least eight years.
The reason for the minimum of eight years is because of the long
time it takes to complete the many essential steps to build a large
power plant. These steps begin with finding and gaining control of a
suitable site, obtaining regulatory approval on the power purchase
agreement, completing the permitting process necessary to begin
construction of the plant, building the plant and allowing some time
for delays in any of these steps. This process is described in a
presentation made at a briefing on 16 May 2008, at the request of
Senator Sanders office.
CSP plants being bid today would be built in the 2012 and 2013 time
period. If developers are to achieve cost reductions from 2 or 3
utility procurement cycles, only an eight year extension is effective.
The power point presentation titled ``Why does it take so long to
build a CSP plant'' is attached to provide additional information on
the steps and time needed to bring a CSP plant into commercial
operation.*
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* Presentation has been retained in committee files.
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The economic benefits from the unleashing of CSP are impressive.
Every dollar of tax credit claimed by the ITC will be multiplied many
times over in terms of the private capital investment, purchases from
suppliers, wages for new jobs, and local and regional flow-through
commerce. The job creation is significant. Approximately 25,000
construction jobs are associated with the 4,500 MW under contract. In
addition, the building of new factories and assembly facilities for the
main components will add more jobs and offer products for export to
help our balance of trade. As natural gas is displaced by CSP,
CO2 emissions are reduced and, in time, its clean energy
could be available for plug-in hybrid cars, thereby helping to reduce
our dependence on foreign oil.
The following analyses provide additional details on the economic
benefits form both CSP plants and related manufacturing:
``Economic, Energy, and Environmental Benefits of
Concentrating Solar Power in California.'' April 2006 by L.
Stoddard, J. Abiecunas, and R. O'Connell Black & Veatch
``New Mexico Concentrating Solar Plant Feasibility Study.''
February 9, 2005 Prepared for the New Mexico Energy, Minerals
and Natural Resources Department by the University of New
Mexico Bureau of Business and Economic Research and Black and
Veatch. The study may be found at: http://
www.emnrd.state.nm.us/ECMD/RenewableEnergy/documents/
NMCSPdraft-final-rpt-02-05. pdf
``The Potential Economic Impact of Constructing and
Operating Solar Power Generation Facilities in Nevada: Draft
Preliminary Report.'' July 8, 2003 by R. Keith Schwer and Mary
Riddel of the Center for Business and Economic Research
University of Nevada, Las Vegas
I want to close with a specific example of CSP's potential:
If the ITC is extended, Abengoa Solar will build the 280MW
Solana CSP plant in Arizona that is now under contract. Under
this contract, the energy will be sold to Arizona Public
Service, powering over 70,000 homes with carbon-free energy.
The schematic in Figure 6 below shows the Solana CSP plant.
This plant will create 2,000 construction jobs and about 85
permanent jobs in a town with 68% of its population living
below the poverty level. And this plant is likely to the first
of many that APS will build to meet its growing demand for new
electricity. However, Solana will not be built unless the ITC
is extended soon. Instead, APS will likely turn to natural gas,
adding to the climate change issues associated with fossil fuel
generation. I attach for the record, a letter sent to Senator
Cantwell, explaining why Solana can not be built unless the ITC
is extended now.
American cannot afford to ignore one of its greatest domestic
energy resources, especially if it is carbon free and can never be
depleted. America cannot afford to ignore developing that energy
resource, especially if it will create jobs that can not be exported.
American cannot afford to ignore that resource, especially if it adds
to security of supply and to the reliability of its energy system. But
we risk doing just that.
CSP developers are investing their money to develop CSP projects,
Wall Street is ready to provide debt and equity, the states have
invested in CSP with their incentives--the missing and critical
investment is that of the federal government via the ITC. Please extend
it now.
Thank you for your attention. I would be pleased to answer your
questions.
Attachment.--Letter to Senator Cantwell
APS,
Abengoa Solar,
June 25, 2008.
Hon. Maria Cantwell,
511 Dirksen Senate Office Building, Washington, DC.
Dear Senator Cantwell, Thank you for your long standing support for
the commercial solar power industry. Two months ago, you and Senator
Ensign successfully amended the Senate's housing stimulus bill to
include language that extended several alternative energy tax
incentives, most notably I.R.C. Section 48's Investment Tax Credit for
solar investment. The vote, 88-8, clearly demonstrated the support for
incentives for alternative energy. Your strong leadership on this issue
is greatly appreciated.
This letter is in response to your request for information from
Abengoa Solar about the impact of the failure to enact an eight-year
extension of the 30% investment tax credit (ITC) for solar property
would have on the proposed Solana plant to be built near Gila Bend,
Arizona. The Solana plant is a 280 MW Concentrating Solar Power (CSP)
plant that is scheduled to be brought on-line in 2011. Abengoa Solar,
Inc, a U.S. corporation, will own and operate this plant. It will
require over $1 billion in capital investment, will create about 2,000
construction jobs and about 85 full time jobs to run the plant once it
is built. In addition, if Solana were to be built, Abengoa Solar would
also build an industrial mirror factory that would create some 150 jobs
in the Southwest.
The output from this plant will be purchased by Arizona Public
Service (APS) under a Purchase Power Agreement and will provide the new
capacity needed to meet the state's growing demand and to respond to
its requirements for clean energy generation. This plant will use
thermal energy storage to allow the plant to continue operation for six
hours after the sun has set, allowing APS to meet the summer cooling
demand well into the evening hours.
Because the Solana plant is a partnership between APS and Abengoa
Solar, both companies are responding to your request.
A long-term extension of the 30% solar ITC is needed to allow
Abengoa Solar to provide the electricity at a price that APS is able to
pay. If Congress fails to enact an 8-year extension of the ITC in the
coming weeks, the simple answer is that banks and equity investors will
be unable to provide financing for this plant and it will not be built.
In the absence of a long-term extension of the ITC, APS would more than
likely rely upon a natural gas fired plant to meet the demand that
could otherwise be met with clean, solar power from Solana.
The delay and failure to pass the extension of the ITC has other
consequences. Since the price for the electricity from the Solana Plant
was fixed several months ago, the price of steel has increased by over
30%. As this plant will use as much steel as would be needed to build a
second Golden Gate bridge, this also risks the economic viability of
the plant. Further delay will only exacerbate this situation. To be
very clear, if the ITC is not extended soon, the Solana project will
not be built because the financing will not be there. The same fate is
very likely for the almost 4,000 MW of other CSP plants with signed
contracts, based on the availability of the 30% ITC. The total loss of
investment is close to $20 billion and the loss in related jobs is well
over 20,000.
Additionally, we need to be clear that the Solana plant is
relatively far along in the development process and that many of the
other proposed CSP plants that together represent our national hopes
for utility-scale CSP are further back in the development process and
will require the proposed eight years to qualify for the project
financing.
We have followed each of the back and forth efforts by the House
and the Senate to extend energy tax incentives. You know that the
American public is watching this as the price of fossil fuel supplies
continue to rise and they want to see a long-term national vision that
will transition us towards sustainable clean energy. The failure of
Congress to find a way to pass this extension is jeopardizing U.S. jobs
and economic activity. We hope some compromise can be found that would
allow this extension to pass very soon so Solana can be built and its
benefits to the economy and environment can be realized.
Sincerely,
Santiago Seage,
CEO, Abengoa Solar.
Don Brandt,
CEO, Arizona Public Service.
The Chairman. Thank you very much.
Mr. Daly, go right ahead. Tell us Mesa del Sol's
involvement in all of this.
STATEMENT OF MICHAEL DALY, MESA DEL SOL, ALBUQUERQUE, NM
Mr. Daly. Thank you, Mr. Chairman, Senators. It is an honor
to be here today.
My name is Michael Daly. I am with Forest City, a national
developer, and we are developing a project called Mesa del Sol.
I am here really to speak on behalf of economic development
primarily because I think we have got a good pulse on what is
going on.
When we came to New Mexico about 3 or 4 years ago, our
first job was to create high-paying jobs for New Mexicans. We
wanted to build a sustainable community with some affordable
housing and also concentrate on creating a community of
continuing learning. We think the solar industry has created a
unique opportunity here in New Mexico, which could be mirrored
in other southwestern areas.
We started with a design. All of our buildings are LEED
certified. We are doing Energy Star on the housing, and we are
doing some unique water-harvesting ideas. But with the help of
Sandia--and I look at my colleague Chuck, who taught us what
concentrated solar was 3 years ago in his lab, and they have
been a tremendous resource--we have gone further.
We are working with the labs on creating the first smart
grid at Mesa del Sol, so houses can actually follow up or down
their electricity depending upon time of day and peak
generation needs. We are looking forward to having about a 40-
house nanogrid at Mesa del Sol smart houses as a demonstration
project. We have 38,000 houses we can leverage over time to
roll on a very aggressive program.
We are also working with Bob Galvin and the labs on a
perfect energy circuit at PNM and looking at transmission and
how we run our switches to create a more efficient system. Now
the base electric cost for Mesa del Sol is $180 million. It
costs $280 million for the perfect system. It is not that we
are going to spend the extra $100 million, but we can provide
for the future, and PNM has been very helpful with that.
But probably most important, we have learned with the
Sandia people and through the delegation as well as those in
the State is that Mesa del Sol has an ideal site for a
concentrating solar site, which we hope to respond to the
upcoming PNM RFP.
That is actually controlled by DOE. It is a 1-by-5-mile
buffer that we have been working with DOE and the base on, as
adjacent to the base and part of the load center. So we will be
responding to the concentrating solar RFP, hopefully with a
development partner. We are talking to some today. We think it
is terrific to have that model project here in Albuquerque. It
works economically, and it is the best site for PNM.
But on the economic development front, what we did 3 years
ago when we came here is we started to canvass solar companies.
We went to trade shows. We went to sites, and we really
searched out--and my colleague Dr. Marker and I had dinner and
a lunch in Colorado 3.5 years ago talking about Schott, which
was really the beginning of that deal.
The solar industry is a terrific industry for jobs. They
are high-paying jobs. New Mexico is well suited for it. They
have got the university. They have got the labs, and there is a
natural propensity to do that type of research.
I will say it started with Advent Solar, which the
delegates were very helpful with, which we appreciate, which is
up producing solar modules itself in an 87,000 square foot
facility here. That is 300 jobs.
I want to take a moment to note that the biggest problem is
solar engineers, and we are working with a project at UNM to
try and get some engineering programs. Forest City has
currently endowed a chair in digital and film media. We are
going to endow a chair and work with Schott to create education
programs for solar engineers. So I think that cornerstone of
educating engineers to create the solar is really important so
that my colleagues, for all of us to get the students to do
this technology.
The Schott Glass was literally the shot heard around the
world. After the Schott Glass deal, our inquiries from solar
companies went from approximately 1 a month to 10 to 15 a
month. It is interesting in terms of where the economy is, our
inquiries and our canvassing relative to actual industries that
are expanding has really compressed in the past 2 months, but
the solar business is going crazy.
Mirror companies, receivership companies, balance
assistance, photovoltaic companies are all looking in the
Southwest and looking to expand. But a lot of them are hesitant
to make major commitments. I am pleased Schott has made the
commitment to make a plant until the ITC has passed.
So we are looking forward to continuing the economic
development. We are looking forward to creating our cost. The
Sandia lab is important, and university education is important.
Fred has mentioned some economics, but I just wanted to
give you some broad-brush things. About 0.1 percent of our
electric is generated by solar nationally today.
Senator Domenici. One tenth of 1 percent?
Mr. Daly. One tenth of 1 percent. So it is a relatively
small amount of our power.
Senator Domenici. That is both the kind that we are talking
about today and the other kind?
Mr. Daly. PV.
Senator Domenici. All kinds of solar?
Mr. Daly. All kinds of solar. So it is a miniscule amount.
To the extent that we went to 2 percent of our power, or
approximately 6,600 megawatts, which is close to what is on the
books right now, we would create more than 1,000 permanent
jobs, 25,000 construction jobs.
The real rollout that I find important is the Schott
factory could generate enough receiverships for that, or
Schott's competitors, that is another 1,400 permanents jobs.
For the mirror company that has got to come here to do the
manufacturing, that is another 1,400 jobs.
You know, with a multiplier effect, that winds up being
40,000 jobs that could be created by just doing this 5,000
megawatts of electricity, which is a tremendous economic boost
not just in New Mexico, but nationally. There are photovoltaic
companies in Vermont, in Boston, in Massachusetts, all over the
United States that are waiting for this to expand.
The total construction dollars to create this 5,000
megawatts is about $40 billion in construction, which really
would just multiply through our economy. That is a why we
should do it from an economic development point of view. We
would certainly be proud to have at Mesa del Sol a 600-acre
concentrating solar plant that is located adjacent to the base
of the research facility. We think it would be a tremendous
coup as the radiation values are there.
What do we need to do? Everyone has talked about the ITC
credit. I would like to mention something, which is a unique
opportunity for DOE to get involved. DOE currently consumes 15
megawatts of electricity a day, has a 15-megawatt load here.
But when you go to DOE, they are hamstrung, from a policy point
of view, that they can't enter into a long-term power purchase
agreement. So they, themselves, cannot enter into and
facilitate a renewable power contract for 30 years because they
are hamstrung with the current procurement rules.
Secondarily, their proxy for what they can purchase that
power for is today's fuel prices with no adjustments into the
future. So I find it an opportunity as much as a detriment to
have DOE take a leadership role in here and perhaps in the
energy bill create ways that the Federal Government, DOE, can
be like the utility company and agree to pay a premium.
While the power is maybe priced at 6 or 7 cents a kilowatt
hour now, perhaps it would have to be 13 or 14 cents a kilowatt
hour, which is detrimental for the military budget. Whereas
DOE, they are the model of--as we were saying, I think it would
be good if they took it on themselves. The load is right here,
and there is a possibility of them participating as well, as
well as other major military installations in this solar belt.
Education. I think creating centers of excellence and
getting funding for specific photovoltaic programs at our
universities, our resource institutions is terrific.
Ultimately, I have to say, as a developer, as an
entrepreneur who wants to see things happen, there is an
instance--as Fred mentioned, there is a problem getting
permitting. The DOE controls one of the many sites in New
Mexico to make one of these solar facilities a reality. It
would be a shame if DOE was actually the impediment in creating
a longer schedule versus being the facilitator to make one of
these things going.
I do want to say that I appreciate the delegation's
offices. I have visited them several times. We wouldn't be as
far in both education and knowing what we have to do, and some
of these things are already in the works, but I wanted to say
these are things that can really facilitate solar jobs, which
is our main mission.
Thank you.
[The prepared statement of Mr. Daly follows:]
Prepared Statement of Michael Daly, Mesa del Sol, Albuquerque, NM
mesa del sol concentrated solar plant
Site control of a 1200 acre flat site adjacent to Mesa del
Sol.
With a 800 megawatt generation projected deficit, PNM has
authorized a feasibility study which will examine the
feasibility of building a concentrated solar plant in New
Mexico by 2011.
PNM has established a joint venture with EPRI to investigate
developing a plant.
Last year New Mexico State Legislature put in place
significant incentives which will subsidize the cost of
producing electricity via a concentrated solar trough plant.
Sandia Labs is the leading concentrated solar trough
research institution in the United States and is located
immediately adjacent to the Mesa del Sol site.
Mesa del Sol is part of the largest load center in the state
and transmission to the grid is readily available on site.
Schott Glass, as a new employer in New Mexico, is a leader
in receiver tube technology
Mesa Del Sol has Among the best solar Resources in the
United States.
The Mesa Del Sol project would have minimal Environmental
Impacts
Kirkland Air Force Base could buy green power from the
plant.
The Chairman. Thank you very much.
Dr. Marker, tell us your perspective from Schott Solar.
STATEMENT OF ALEX MARKER, RESEARCH FELLOW, SCHOTT NORTH
AMERICA, INC., ELMSFORD, NY
Mr. Marker. Senators, thank you for the opportunity to
speak with you today about concentrating solar power and the
vital role CSP can play in securing America's energy
independence, creating jobs right here in New Mexico, and how
CSP can become an economic engine, driving sustainable growth.
In just 1 hour's time, the amount of energy that the Sun
shines upon the Earth's surface exceeds the energy consumption
of all mankind in an entire year. In the 5 minutes I will be
speaking with you today, the Sun shining upon the United States
alone contains enough energy to satisfy Americans' power demand
for an entire month. Nowhere is that potential greater than
right here in the desert Southwest and especially in New
Mexico.
CSP is a proven technology. The SEGS plants in the Mojave
Desert have been operating for more than 20 years providing 350
megawatts of power, generating clean electricity to hundreds of
thousands of homes in California. Just last year, 6-megawatt
Nevada Solar One facility went online producing clean
electricity for Nevada.
There are plenty of high-value resources available right
here in New Mexico for CSP generation. In fact, the entire
State's electrical needs could be satisfied by the Sun. Energy
can be even exported to other regions.
But all of this is at risk without a firm commitment from
the Federal Government in the form of effective policy and
long-term extension of the investment tax credit. The U.S. is a
sleeping giant when it comes to solar energy. By extending the
investment tax credit, this giant will awaken.
According to independent analysis, there are approximately
4,000 megawatts of CS power plants currently in planning or
development stage. That is 4,000 megawatts that will most
likely never be built without a long-term extension of the ITC.
The industry needs the Federal Government's support to make CSP
power generation competitive with that of traditional
generation technology.
What does effective Federal policy translate to? For one
thing, the increase in solar energy adoption means an increase
in jobs. It is forecast that if the ITC is extended, 62,000
manufacturing and distribution jobs will be created in the
solar industry directly as a result of increased adoption of
renewable energy. Many of these jobs in the CSP arena.
On top of that, there will be an increased demand for
electricians, plumbers, engineers, potentially thousands of new
jobs created each year. This is job growth for Americans by
Americans for an industry that will benefit America.
The company I represent, Schott Solar, is in the
construction phase of a large manufacturing facility in
Albuquerque. This plant will employ 1,500 people in the
production of photovoltaics and receivers for the CSP power
plants. Over the long term, Schott's investment in New Mexico
will reach $500 million, and the economic impact is forecast to
exceed $1 billion.
This is just what one company is doing in one community.
There are other companies undertaking similar large projects
from Michigan to Oregon and many more that are ready to do so
once a clear commitment from the U.S. Government is established
in the form of a long-term investment tax credit.
If the renewable energy tax credit expires, the impact next
year will be more than 100,000 jobs either lost or not created,
according to Navigant Consulting. Additionally, there will be
more than $20 billion worth of investments that won't be made,
and there is no doubt that this money and those jobs won't go
overseas.
Renewable energy is domestic energy. Domestic energy not
only means jobs for Americans, but it means reducing our
greenhouse emissions. It is something Americans want. According
to a recent poll, 94 percent of Americans say that it is
important for the United States to develop and use solar
energy. Almost 80 percent feel that the Federal Government
should make development of solar energy a major priority
through actions such as extending the ITC.
We have an opportunity today to address the challenge of
global warming while growing our economy. All we need to do is
harness the power of the Sun, and to do that, we need your
support. Distinguished members of the Senate Energy and Natural
Resources Committee, we sincerely thank you for your time and
your consideration in this important matter.
[The prepared statement of Mr. Marker follows:]
Prepared Statement of Alex Marker, Research Fellow, Schott North
America, Inc., Elmsford, NY
SUMMARY
Concentrated Solar Power (CSP) represents a proven and
reliable technology.
Solar energy is relevant for almost every country in the
world, especially the United States, where conversion of only
2.5% of the nation's usable area into solar farms would satisfy
the entire nation's energy needs.
Investment in solar will lead to the creation of hundreds of
thousands of jobs (UC Berkeley).
Energy produced from the sun by CSP benefits from stability
in costs, as there are no commodity priced raw material
requirements for fuel, only minimal (3 cent kW/h) operating
costs.
By 2050, solar power could end U.S. dependence on foreign
oil and slash greenhouse gas emissions (Scientific American).
With the necessary investments, energy produced by the sun
could become cost competitive with fossil-fuel based
technologies by 2020 (NREL).
The United States has the opportunity today to address the
challenge of global warming while creating jobs and growing the
economy.
A PROVEN RESOURCE WITH ALMOST LIMITLESS POTENTIAL
In just one hour's time, the amount of energy that the sun shines
upon the earth's surface exceeds the energy consumption of all of
mankind in an entire year. In the time it takes you to read this
document, the sun shining upon the US alone contains enough energy to
satisfy America's power demands for several months. Energy from the sun
is an integral part of a renewable energy portfolio. A portfolio that
would strengthen our nation's economy, secure our energy independence,
and provide clean energy to meet the ever increasing demand.
That potential is greatest in the desert southwest, and especially
New Mexico.
The idea of harnessing the power of the sun is not new. Documents
dating back to Archimedes have shown theories on how this can be
accomplished. Yet it hasn't been until recently that major strides have
been made on mass-producing solar technology, and not until the last
few years that technological innovations have been made to dramatically
reduce costs.
CONCENTRATED SOLAR POWER
Concentrated Solar Power (CSP) plants are utility-scale power
plants that generally produce greater than 50 MW of power, enough to
supply the energy needs of thousands of homes. In one variation of CSP,
called parabolic trough, hundreds of trough-shaped parabolic mirrors
are continuously adjusted to face the sun. These parabolic mirrors
concentrate the sun's thermal energy onto receivers, located along the
mirrors' focal points.
The concentrated solar radiation increases the temperature of the
thermo-oil Heat Transfer Fluid (HTF), flowing through the receivers, to
approximately 750 F. This super-hot fluid is then used to turn water
into steam, which drives a turbine, generating electricity. The
capacity of these power plants is well suited for utility-scale power
generation as the plant's peak efficiency matches peak demand
requirements placed on the grid.
RELIABLE AND PROVEN CLEAN ELECTRICITY GENERATION
Over the decades, solar technologies have been reliably providing
clean energy to tens of thousands of Americans. Photovoltaics have been
in production for 50 years, and SEGS in the Mojave Desert, a CSP
parabolic trough power plant, have been operating for more than 20
years, providing 350 mega watts of power per year. Just last year the
Nevada Solar One facility went online producing 64 mega watts of clean
power.
UNITED STATES--A ``SLEEPING GIANT''
The U.S. has at least 250,000 square miles of land in the Southwest
alone that are suitable for constructing solar power plants, and that
land receives more than 4,500 quadrillion British Thermal Units (BTU)
of solar radiation a year. Converting only 2.5% of that radiation into
electricity would match the nation's total energy consumption in 2006.
According to the American Solar Energy Society: ``Generation from
CSP technologies, especially those that can be augmented with thermal
storage or hybridized with natural gas, is well matched with southwest
load profiles, which tend to peak in the late afternoon and early
evening.''
``States with suitably high solar radiation for CSP plants include
Arizona, California, Colorado, Nevada, New Mexico, Texas and Utah. Even
if we consider only the high-value resources, nearly 7,000 GW of solar
generation capacity exist in the U.S. Southwest.'' (Jan. 2007)
According to independent analysis, resource calculations show that
just seven states in the U.S. Southwest could provide more than 7
million MW of solar generating capacity--roughly 10 times the total
U.S. generating capacity from all sources today.
The following chart shows available resources in the desert
Southwest (considering grade of less than 1 degree, and other necessary
land conditions.
The DESERTEC model, which has been developed to supply solar energy
to Europe, provides a realistic model in exporting energy. In the
Desertec model, energy would be generated in Northern Africa and
Southern Spain and then shipped to Northern Europe. A similar model can
be adapted and applied to the Southwest of the United States, where
states like Nevada and New Mexico export solar energy to northern areas
of the U.S. and Canada.
A key stumbling block in the US however, is in transmitting the
energy produced in the Southwest to other regions. The need for a
national ``smart grid'' is seen as essential in creating a network of
energy produced by renewable energy. Even without the proliferation of
renewables, many experts are in agreement that the nation must
implement a ``smart grid''--as evidenced by the California rolling
black-outs, the NorthEastern blackout of 2004, and the South Florida
blackout of 2008.
In a December, 2007 a report issued by Emerging Energy Research
titled ``Wind Power Strategies in the US 2007-2015'' stated: ``CSP
production in the US and Spain expected to reach 7500MW by 2020 enough
to power 6.75 million homes''
``CSP is the fastest growing utility-scale renewable energy
alternative after wind power, with up to $20 billion expected to be
invested in CSP over the next five years.''
The long-term potential for solar technologies is even higher, as
represented by the following chart (figure 2)* from the Solar
Wirtschaft (Germany).
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* All figures have been retained in committee files.
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Advantages of solar energy production are numerous. In addition to
no carbon emissions, harnessing the energy from the sun pulls energy
from a never-ending resource. The costs are fixed, and energy prices
remain stable as there is no reliance on a fossil fuel. Solar is a
complimentary technology to other forms of renewable energy, such as
wind and biomass.
MIDTERM: WHAT DOES IT TAKE TO MAKE CSP COST COMPETITIVE
Many view solar technology to be cost-prohibitive, while this was
true 20, even 10 years ago, thanks to innovations and improvements in
efficiency from industry, the cost per kW/h is steadily decreasing. It
is only through continued government support however, that the industry
will continue to make investments in research and development, which
will further reduce costs and bring them in line with electricity
generation from traditional fossil-fuels.
A chart (figure 3) for CSP technologies again shows parity within
the next decade with key productivity sources in economy of scale,
increase of efficiency and the development of storage technologies.
Funding is again assumed for eight years through the extension of the
ITC.
Currently in the United States power from renewable energy sources
accounts for less than 6.5% of the US energy consumption, of which
solar is 1 %. However the US is showing one of the biggest growth rates
with CAGR (compounded annual growth rate) of 36% from 2006--2011.
In a conservative market scenario, the overall US PV market will
reach 900 MW in 2012. Through an aggressive market scenario, the US
market can more than triple, to almost 3GW of installed capacity by
2012. The aggressive scenario assumes a long-term (8 year) extension of
the investment tax credit. This extension will allow for sustained
manufacturing capacity expansion, as evidenced by companies like
SCHOTT, who is investing $500 Million in a solar technology production
facility in Albuquerque, NM. Strong demand growth must continue with
minor supply excesses causing large price declines in line with unit
subsidy rate declines. The 3GW market in the US compares to a 7.6GW
world market.
ENERGY COST STABILITY
With oil prices currently exceeding $140/barrel (6/30/08), and
energy prices correlating with the price of oil, the need for fixed-
price energy solutions is more important than ever. Solar represents
fixed cost power generation. With more widespread deployment of CSP,
through economies of scale and technological improvements, the costs of
CSP power generation will continue to decrease. Currently, the cost to
operate a CSP power plant is approximately 3 cents per kilowatt hour
(NOT INCLUDING THE COST OF AMORTIZING THE CONSTRUCTION OF THE
facility).
The following chart (figure 4)--labeled Exhibit 1-1, shows CSP
deployment as it relates to the cost of natural gas.
effective legislation will push csp development
Investment tax credit
There are key steps the Federal government can take to create a
favorable climate for the deployment of CSP. First and foremost, a
long-term renewal of the Federal Investment tax credit (ITC) is seen as
an essential first step. Although the overall cost of the ITC extension
is variable based on the amount of solar actually installed,
independent analysis (GE Capital) has stated that the solar component
(including PV) will most likely not exceed 2 billion USD over the 8
years. When compared with the job creation and the billions of dollars
in investment by private industry, the payback on the 2 billion should
not be difficult to recoup.
The following chart (Figure 5), labeled exhibit 1-16, shows how the
ITC, along with other (global) legislation will spur development and
deployment of CSP.
Federal Renewable Portfolio Standard (RPS)
Many states, including New Mexico, have enacted Renewable Portfolio
Standards (RPS') which state that by a certain time, a certain
percentage of electricity either generated--or consumed--in a State
must come from renewable sources. Some even go further down by
mandating a renewable mix where a certain percentage must come from
solar. The Federal government could enact similar legislation, which
would signal to the CSP industry a clear commitment, which would enable
long-term investment. As a comparison, states with RPS' currently have
80% of the renewable energy projects in the pipeline compared to 20% of
non RPS states (according to EER).
Feed in Tariffs (FIT)
A current stumbling block for the development of CSP is in
negotiating power purchase agreements (PPA's) with utilities, who buy
the renewable energy and then distribute it to customers. The FIT
model, originally developed in the US, and successful deployed in both
Germany and Spain (see case-study following) would create a Federal
incentive to purchase energy from renewable sources. Since CSP is a
utility-scale generator, this would ease the constraints of the
utilities who are under pressure to deliver power to the end customer
at competitive rates, but also are obligated, in many areas to purchase
energy from renewable sources (from the RPS).
A national FIT is seen as one of the most effective means of
rapidly growing the renewable energy market in the US.
Easing Land Management Restrictions
There is a current moratorium placed on new solar projects on
Federal lands as the environmental impact of CSP power plants is
currently being studied. While the industry understands and recognizes
the importance of such studies, stopping all projects while
commissioning an environmental impact studies is perhaps too far
reaching. A compromise should be developed that strikes a balance
between renewable energy and stewardship for the environment.
Transmission
Since CSP is currently not installed on a widespread basis, and the
energy produced is therefore consumed in local regions--due to the
extraordinary potential of the technology, a time will come when
transmitting the energy to other regions will become necessary. In this
regard, the Federal government can support utilities in creating a
``smart grid'' that will enable such transmission over the network of
utility owned transmission lines.
NATIONAL, BI-PARTISAN SUPPORT FOR SOLAR
A recent (June, 2008) study conducted by the independent polling
firm Kelton Research, demonstrated the tremendous support solar energy
has across America. 94% of Americans, representing individuals across
all political affiliations and geographic regions, support the
development and use of solar power. Additionally, approximately 75% of
Americans support the extension of the ITC and almost 80% feel that
solar should be a ``major priority'' of the Federal government. When
asked which one energy source they would develop if they were
president, most respondents chose solar over any other type of energy
generation.
TECHNOLOGICAL BREAKTHROUGHS ON THE HORIZON
When speaking about electricity generation, you're speaking in
costs. The cheaper the generation, the more widespread it will become.
Critics of solar state that the energy produced is not cost-competitive
with current methods, and it only works during the day.
Through support from the Federal government, private industry, will
most likely overcome key technical hurdles in the technology, which
will further reduce costs. Currently, the Heat Transfer Fluid (HTF)
breaks down if it exceeds approximately 750 degrees Fahrenheit. If a
suitable replacement can be developed the potential exists to heat the
fluid to higher temperatures, improving the efficiency.
Additionally, in Spain, the first CSP plants that utilize molten
salt storage units are currently being deployed. By storing the heat
generated during the day, CSP plants could become a 24/7 operation
without the need of a natural gas feed back-up.
Other advancements in the technology can be made through advanced
coatings on the receivers, lighter and cheaper materials used in
construction of the parabolic trough mirrors, and other areas of the
power blocks. These advancements can be made if the CSP industry knows
that a market will exist to deploy and utilize the technology that can
be developed.
CASE STUDY: A MODEL FOR ECONOMIC DEVELOPMENT--SPAIN
After an early start as a world leader in solar energy, the United
States lags behind several countries in both solar energy development
and deployment. However, global warming and rising prices for fossil
fuel are causing the United States to consider how it can regain world
leadership in the generation of solar energy. Overseas best practices
offer proven models for how the U.S. can increase solar energy
production. One of the leading examples may be found in Spain, where
the government has undertaken aggressive initiatives that have made
that country one of the world's solar power leaders. Not only have
these initiatives helped increase the amount of solar energy generated
in the country, but they have spurred the development of Spain's solar
power industry as well proving to be an economic stimulus and creating
jobs.
There are some obvious reasons for Spain's leadership in solar
power. For one thing, solar energy generation is simply the
exploitation of one of the country's most abundant natural resources.
As British and Scandinavian sun worshippers can attest, Spain enjoys
more sunlight than any country in Europe. Yet, in many ways, this
resource remained untapped until 2004, when the Spanish government
issued Royal Decree 436, which made sweeping reforms to solar energy
policy, creating a new system for renewable energy development and
deployment, with its own regulatory framework.
The decree ended a regime of small steps toward promoting the use
of solar power and instead initiated the adoption of bold policies that
would strongly encourage the deployment of solar energy. These policies
included grid connection and tariff reform, promotion of large-scale
concentrated solar power (CSP) plants and later, solar panel mandates
for new and renovated buildings. Their initial goal was ambitious--30
percent of the nation's electricity to be supplied by renewable energy
sources by 2010.
GRID CONNECTION
Grid-connection is critical to the development of renewable energy
anywhere. In Britain, for example, the Labour government refuses to
remove obstacles to grid-connection, and solar energy development lags.
Without some form of guaranteed grid access, it is difficult for
companies other than the grid owners to develop large-scale solar power
plants, severely limiting the number of companies who can enter the
market.
In 2004, the Spanish government removed the economic barriers to
grid-connection for renewable energy sources. With this single measure,
large-scale solar power plants were guaranteed access to the
electricity grid and a market was created for the solar energy
generated at these plants.
ECONOMIC INCENTIVES
Spain has made economic incentives, particularly feed-in tariffs, a
key feature of its solar energy program. In 2002, Spain became the
first European country to adopt a feed-in tariff of 12 euro cents for
every kilowatt-hour supplied to the grid. In order to further
accelerate the development of solar power the government passed a
decree in 2004 that almost doubled the feed-in tariff for solar energy
kilowatt hours, to 23 euro cents, and guaranteed these rates for 25
years. Instantly, large-scale photovoltaic and CSP generation were
transformed into profitable business propositions as the 23 euro cents
per KWh tariff was made specifically applicable to 100 KW to 50 MW
plants. To keep the ball rolling, in 2007, the subsidies were raised
yet again to 27 euro cents per KWh.
When combined with grid connectivity, these economic incentives
made the development of solar energy in Spain practical. Planning and
construction of solar generating plants in Spain accelerated, creating
jobs and stimulating the economy.
LARGE SCALE CSP
Though CSP is less well known than PV, since the 1980s CSP plants
have reliably and cost-effectively generated large amounts of clean
energy in California's Mojave Desert. Recognizing the tremendous
potential that CSP offers geographic areas located in the world's
sunbelt, Spanish policy essentially makes CSP fully equal to PV
technology. With large areas that receive strong amounts of direct
sunlight, Spain is very well suited for the development of CSP plants.
At the end of this year Spain plans to start operation of its first
commercial CSP plants. The first plant, Andasol 1, will be the first
commercial parabolic trough CSP plant in Europe. It will have a half-
million square meter collector field and will be capable of supplying
electricity to as many as 50,000 homes. This plant is the world's first
to include thermal storage technologies that allow the plant to produce
power at night. It does this by storing up to seven hours of energy in
hot molten salt reservoirs. The heat in these reservoirs can be tapped
to generate electricity after the sun goes down. Ultimately, this
technology could enable solar plants to operate around the clock.
The Andasol plants are only the beginning. As of early 2008, five
other Spanish CSP projects were underway, with a total expected
capacity of 190 MW. Spain's tremendous CSP potential recently led my
company, SCHOTT, to invest approximately $28 million in a new parabolic
trough CSP receiver production facility in Spain.
SOLAR MANDATES FOR NEW AND RENOVATED BUILDINGS
In addition to opening up the grid, providing aggressive tariffs to
solar power generators and encouraging the development of both PV and
large-scale CSP, Spain has undertaken another step towards a solar
energy future. A new policy, introduced in 2006, mandates that all new
and renovated buildings include either solar water heating systems or
PV arrays. New homes must have solar heating systems capable of
providing from 30 to 70 percent of their hot water, with the specific
requirements to be determined by the building's location and expected
water usage. These panels will not generate electricity, but they will
help cut the demand for electrical power significantly. For non-
residential buildings, such as hospitals and shopping malls, the
standard is different. They are required to have PV panels that
generate a portion of their electricity. The Environmental and Housing
Ministries expect these mandates to bring energy savings of 30 to 40
percent for each building, and reduce carbon dioxide emissions by 40 to
55 percent.
In 2004 the Spanish government set a goal of 400 installed MW of PV
and 500 MW of CSP by 2010. Currently, it seems likely that Spain will
easily exceed these goals before 2010. By 2007, about 600 total MW of
solar generating capacity were installed, with more projects under
construction and scheduled for completion in 2008 and 2009. In fact,
four of the 13 largest PV power plants in the world are in Spain. Two
plants in Jumilla and Beneixama each produce 20 MW and each deploys
more than 100,000 PV panels. The two other plants are a 13.8 MW
facility in Salamanca and a 12.7 MW operation in Lobosilla.
LESSONS FOR THE UNITED STATES
The Spanish experience offers important lessons for the United
States, and especially the American Southwest, given that its climate
is similar to that of Spain. The first and most important lesson is
that without bold long-term policies, solar energy generation will only
grow in fits and starts. Unfortunately, U.S. federal solar energy
policy legislation has been short-term, with incentives periodically
allowed to lapse, providing developers with no certainty that these
incentives will be renewed or changed. This deters investment, and does
not persuade the public that Congress and the Administration are
serious about renewable energy policy.
Solar power plants--like any power plants--are major commitments,
expected to be operational for at least 30 years. These kinds of
investments require long-term federal energy policies.
For example, the U.S. tax credit now applies to a range of
renewable energy projects and affords a 1.9 cents per kilowatt-hour
benefit for the first 10 years of operation for a renewable-energy
facility. It also lapses at the end of 2008. So projects--solar, wind
and other renewables--languish while their developers await
Congressional action.
The U.S. could benefit from adopting other aspects of Spain's solar
energy policy. If the U.S. instituted a national grid connection
policy, developers would be better able to overcome the obstacles
inherent to a federal system with multiple jurisdictions. Currently,
these bureaucratic roadblocks slow down or completely stall the
development of many large-scale solar energy projects. In addition, the
U.S. could further spur solar energy development by mandating the
installation of solar energy in residential or commercial buildings.
The United States, and especially its desert Southwest, possesses
great potential for rapid solar expansion if policies akin to those of
Spain are adopted. Many government officials, utility executives and
citizens in the American Southwest already recognize this, and are
taking action to develop the region's abundant solar resources, despite
federal inaction. The Western Governors Association has set an
ambitious goal of generating no less than 8,000 solar MW by 2015, and
has recommended many regulatory and other public policy changes to
promote solar and other renewable energy development. Early this year,
Arizona Public Service announced plans to build the 280 MW Solana
Generating Station near Phoenix.
Another lesson the U.S. can learn from Spain is that strong support
for solar power provides many economic benefits. For instance, Spain's
Ministry of Industry estimates that the solar and other renewable
energy industries will create 200,000 new jobs by 2010.
The United States has found itself behind in the deployment of
important technologies before, and found ways to catch up and secure
world leadership. However, if our country adopts renewable energy
policies similar to Spain, we can catch up just as we did with other
technologies. And catching up will not just help the U.S. move beyond
the use of fossil fuels and reduce its greenhouse gas emissions.
Despite not having solar energy policies as aggressive as Spain's, the
Solar Energy Industries Association (SEIA) estimates that 314 megawatts
of new solar were installed in the U.S. in 2007, contributing $2
billion to the U.S. economy and creating 6,000 new jobs.
SOLAR ENERGY AS AN ECONOMIC ENGINE
Solar energy is domestic energy. The economic engine created by a
powerful solar energy policy is multi-faceted. The most powerful
component of the strengthening in the economy is in job creation. The
University of California Berkley estimates ``green jobs'' will reach
one million in the United States by 2020. These are high-wage
manufacturing and professional jobs. In addition, there are a host of
associated industries, such as plumbers and electricians that will also
benefit.
It's forecasted that if the ITC is extended, 62,000 manufacturing
and distribution jobs will be created--directly as a result of
increased adoption of renewable energy in the first year of the
extension.
This is job growth for Americans, by Americans, for an industry
that will benefit America.
In addition to job creation, there are other economic benefits.
Consumers will be able to combat volatile energy prices. Utilities will
finally have a power infrastructure that can meet peak demand.
Distributed solar can stabilize grids and offset expensive
infrastructure upgrades. By 2020, the cost of generating solar power is
forecast to become cost -competitive with fossil fuel energy
production.
As an example, SCHOTT Solar, the company I represent, is in the
construction phase of a large manufacturing facility in Albuquerque,
NM. This plant will employ 1,500 people in the production of
photovoltaics and receivers for CSP power plants. Over the long-term
SCHOTT's investment in New Mexico will reach $500 million and the
economic impact is forecast to exceed $1 Billion. But this growth will
only happen if effective legislation is passed.
That's just what one company is doing in one community. There are
other companies undertaking similar large projects, and many more that
are ready to do so, once a clear commitment from the US government is
established in the form of a long-term Investment tax credit. If the
renewable energy credits expire, the impact next year would be more
than 116,000 jobs either lost or not created according to SEIA and
Navigant Consulting. Additionally, there will be more than $20 billion
worth of investments that won't be made. And no doubt that that money,
and those jobs, would go overseas. Considering the current economic
climate of the country, these job losses, and investments moving
overseas would be detrimental to the overall health of the nation's
economy.
SOLAR AS A COMPONENT OF NATIONAL SECURITY
Currently the United States is reliant upon politically unstable
regions of the world for much of its energy. According to the Energy
Information Agency, two-thirds of the petroleum and 20% of the natural
gas consumed in the United States is imported from other countries, and
U.S. production of both is dropping while consumption continues to
rise.
By installing solar powered power plants and the necessary
infrastructure to transmit energy across the nation, states in the
desert southwest could become an exporter of energy, helping economies
in the region grow. Increasing energy consumption from renewable energy
will stabilize energy costs and minimize wild fluctuations on the
economy caused by volatile energy prices.
According to a study published in Scientific American (January,
2008) by 2050, solar power could end U.S. dependence on foreign oil and
slash greenhouse gas emissions.
With sun shining all across the world, every country can develop
solar energy as a means to create energy independence. Already, through
solar, rural villages in South East Asia are benefiting from having
electricity for the first time. Solar is scalable and deployable.
SUMMARY AND RECOMMENDATIONS
Renewable energy, specifically solar, represents tremendous
potential for the United States. Through effective legislation, the
United States can develop an industry with proven successes in Germany,
Japan, and Spain. An industry that has the potential to create up to a
million jobs domestically, reduce the country's dependence on foreign
energy supplies, improve the environment for future generations.
With the eight year extension of the Investment tax credit
(ITC), an additional 62,000 jobs will be created. Up to a
million will be clean-energy employed in the sector by 2020
according to UC Berkeley.
By fostering developing of renewable energy, and
specifically solar, costs will become competitive with fossil
fuel based technologies by 2020.
With the development of a National grid connection policy,
solar project developers would be better able to overcome the
obstacles inherent to a federal system with multiple
jurisdictions. Currently, these bureaucratic roadblocks slow
down or completely stall the development of many large-scale
solar energy projects.
With multiple GW of installed solar capacity, the US will be
reducing its growing dependence on foreign energy source, which
often come from politically unstable regions of the world.
Strong support for solar will enable the industry to
continue to make technological advances, including thermal
storage, which extends the operating hours of solar power
plants beyond daylight hours.
CSP is a proven, reliable technology with a tremendous
potential.
[Appendix documents have been retained in committee files.]
The Chairman. Thank you very much.
Mr. Wan, representing Pacific Gas & Electric, thank you for
coming, and we look forward to your testimony.
STATEMENT OF FONG WAN, VICE PRESIDENT, ENERGY PROCUREMENT,
PACIFIC GAS & ELECTRIC COMPANY, SAN FRANCISCO, CA
Mr. Wan. Senators, thank you for the opportunity to be here
today and for this committee's leadership and commitment to
advancing a clean energy future for the Nation.
My name is Fong Wan. As part of my role as Vice President
of Energy Procurement at PG&E, I have the responsibility for
overseeing the purchases of renewable energy.
PG&E has a long and accomplished track record on clean
energy. We have contracted with about 40 renewable suppliers in
the last 5 years. We are one of the Nation's largest buyers of
renewable energy. Due to the large economy we serve, which is
about 1 out of every 20 Americans, we have been fortunate to
have the opportunity to meet with developers and technologies
from all over the world.
We are committed to expanding our renewable supplies on an
unprecedented basis. This includes a very sizable commitment to
CSP. We have already contracted with four large solar thermal
suppliers of various technologies that we can get into later.
This amounts to about 1,700 megawatts. When these resources
come online, they will represent enough power to meet almost 10
percent of our peak summer needs.
Moreover, we have stated a strong desire to pursuing even
more opportunities in this area. That is because of this
energy-producing availability at a time when our customers need
it most and its relative cost effectiveness compared with many
other renewable options. You have to take into consideration
the time of the generation of CSP as well as theoretical
potential. By National Renewable Energy Labs' estimate, CSP
could, in theory, produce 7 times the energy needed to serve
California.
I also want to provide our latest observation on
photovoltaics. PV are making a strong and great progress for
utility-scale applications. We also hope to be in a position to
announce several contracts for utility-scale PV applications as
well.
But given these advantages, it is reasonable to ask why the
Nation is not seeing greater progress on renewables. As someone
with daily experience in today's renewable energy marketplace,
I would like to point out a few barriers. It is important to
underscore that the Federal Government is uniquely positioned
to help the country push past these obstacles.
The first is economics. Despite falling costs, CSP cannot
yet compete on price with electricity produced by natural gas.
We are confident that will change as the economies of scale are
achieved and technology is refined. But in the interim, Federal
production and investment tax credits are absolutely essential
for continued progress.
Past experience shows a smart use of tax incentives makes
tremendous difference in the pace and extended innovation and
deployment of new renewable projects. The Federal Government
should extend the PTC and ITC. It should also remove the ITC
exclusion for regulating utilities. Utilities represent a
significant source of potential new cost-effective capital
investment. We should remove this handicap that effectively
sidelines well-capitalized, motivated investors.
The lifetime of the extension is also critical. We believe
the minimum commitment should be 8 years, as you have heard
earlier. An 8-year extension would send a critical market
signal. It would provide the assurance investors need to spur
long-term R&D and allow the transmission to be built for large-
scale CSP projects.
Without a longer term extension, we are deeply worried that
developers will slam on the breaks and projects will be
delayed, stopped, or prices will increase by as much as 30
percent to our customers. We, therefore, urge Congress to take
action as soon as possible on the legislation it has before it.
Another significant challenge in bringing renewables online
faster is transmission. Without new lines, we cannot get power
from remote locations to the customer. Yet siting new
transmission has become extraordinarily difficult. Mr.
Chairman, you were exactly right when you recently said we need
to be sure that first rules for planning, siting, pricing,
interconnection, and openness of access are adequate.
Right now, it is not uncommon for a project to be stopped
by a single stakeholder, and actions by some Federal agencies
can also have major ramifications. We support BLM's desire for
a comprehensive approach to solar projects in the Mojave Desert
and throughout the West. We also appreciate BLM's commitment to
continue to process those applications which already have been
accepted. However, we hope that future CSP projects are not
further complicated by the deferral on new applications.
A third challenge is integrating these intermittent
renewable resources into our overall supply. One key is
developing storage technology. We applaud Congress for
including energy storage R&D program in legislation this year.
To summarize, in this time of high energy prices, a weak
economy, and heightened focus on security, the Federal
Government is uniquely positioned to provide clarity of vision
and foster stable growth in this critical sector of the energy
market. We encourage policymakers to address the challenges
outlined, and we look forward to working with you to do so.
Thank you very much.
[The prepared statement of Mr. Wan follows:]
Prepared Statement of Fong Wan, Vice President, Energy Procurement,
Pacific Gas & Electric Company, San Francisco, CA
Chairman Bingaman, Ranking Member Domenici, and Members of the
Committee, I am very pleased to appear before you this morning on
behalf of Pacific Gas and Electric Company to offer my views on the
important role of concentrated solar power (CSP) as a clean, renewable
source of energy. My name is Fong Wan and as part of my role as Vice
President of Energy Procurement for PG&E, I have the responsibility for
overseeing all of our renewable power procurement. At a time of
historically high energy prices, increasing concerns over climate
change and U.S. energy security, I commend the Committee for its
leadership in addressing this important topic and for the continued
commitment to and support for alternative energy that Chairman
Bingaman, Ranking Member Domenici and others on this Committee have
demonstrated over the years. The Energy Policy Act of 2005 and the
Energy Independence and Security Act of 2007 have both helped to
advance alternative energy, improve the overall energy efficiency of
our economy and begin to dismantle barriers to ushering in a new energy
paradigm for the 21st century.
Pacific Gas and Electric Company, headquartered in San Francisco,
California, is one of the largest natural gas and electric power
utility companies in the United States. The company provides natural
gas and electric service to approximately 15 million people throughout
a 70,000-square-mile service area in northern and central California.
PG&E proudly delivers some of the nation's cleanest energy to our
customers. On average, more than half of the electricity we deliver to
customers comes from sources that emit no carbon dioxide, or
CO2, and an increasing amount comes from renewable sources
of energy. In 2007, approximately 12 percent of our electric delivery
mix was comprised of California-eligible renewable resources.\1\
---------------------------------------------------------------------------
\1\ As defined in Senate Bill 1078, which created California's
renewable portfolio standard, an eligible renewable resource includes
geothermal facilities, hydroelectric facilities with a capacity rating
of 30 MW or less, biomass, selected municipal solid waste facilities,
solar facilities and wind facilities.
---------------------------------------------------------------------------
PG&E is actively pursuing renewable generation resources on behalf
of our customers for several reasons, including the following: first,
it is what our customers consistently tell us they want; second, it
furthers our efforts to meet the California renewable portfolio
standard, which requires that 20 percent of our electric power be
derived from renewable energy sources by 2010, a policy goal that PG&E
strongly supports; and third, it allows us to better manage our future
cost risk, on behalf of customers and shareholders, by taking volatile
and rising fuel prices out of the cost equation for this portion of our
generation.
PG&E has announced several contracts with wind, geothermal, biogas
and solar developers. Solar thermal energy, the subject of today's
hearing, is an especially attractive renewable power source because it
is available when power is needed most in California--during the peak
mid-day summer period. PG&E has entered into four solar thermal power
procurement contracts totaling up to 1,737 megawatts of power, enough
capacity to supply almost 10 percent of our peak summer needs. These
include a contract with Ausra for a 177-megawatt facility in San Louis
Obispo County, CA, a contract with Solel for a 553 megawatt facility in
San Bernardino County, CA, and a contract with Brightsource Energy for
500 megawatts from facilities in San Bernardino County with an option
for another 400 megawatts.\2\
---------------------------------------------------------------------------
\2\ The fourth contract is with San Joaquin Solar for 106.8 MW in
Fresno County, CA.
---------------------------------------------------------------------------
We believe the potential for solar thermal technology, as well as
other solar power technologies, is significant--and we are not alone.
For example, a study prepared by the National Renewable Energy
Laboratory (NREL) on the potential for concentrated solar power, or
CSP, in California and the rest of the Southwest U.S. indicated that
CSP in California could produce upwards of seven times the energy
needed to serve the state. NREL also suggests that costs for CSP
technologies could decline significantly, from approximately 16 cents
per kilowatt-hour on average today, to approximately 8 cents per
kilowatt-hour in 2015. The halving of the cost of this energy in seven
years is premised on an assumption that at least 4,000 MW of CSP will
be built by then--not just contracted for--to achieve ``learning
curve'' benefits. For a comparison to another major energy technology
development effort, cost estimates for advanced coal power generation
with carbon capture and storage are on the order of 11 cents per
kilowatt-hour.
We are also impressed by the progress being made in reducing the
cost of photovoltaic technology and look forward to a healthy
competition between CSP and utility-scale photovoltaics to meet the
peak electric needs of California customers. We expect to announce a
number of large, utility-scale photovoltaic projects in the near
future. We think the competition between the two solar technologies
will help our customers over time by bringing the cost of solar energy
down.
As we move forward aggressively to deploy these renewable, clean,
domestic energy resources, we recognize that challenges remain to fully
realizing their potential in California, and across the nation. I will
use the balance of my remarks to outline some of the challenges we see.
A. Extension of Incentives is Essential
As noted, while the cost of solar is anticipated to
decline over time, competitive electric power pricing
is perhaps the biggest current obstacle to more rapid
and widespread deployment of solar and other
renewables. Still a nascent industry in the U.S., solar
has yet to reach economies-of-scale that will bring
down the per-unit production cost to levels competitive
with natural gas-fired plants.
One of the most important tools needed until the
prices become competitive is the Investment Tax Credit
(ITC). As a major buyer of renewable energy, Pacific
Gas and Electric Co. is concerned that without proper
tax incentives, there will be a significant slowdown in
the development and construction of solar and other new
renewable energy projects and technologies going
forward, making it extremely difficult to meet the
economies-of-scale required to drive down cost. An
example of this phenomenon can be seen in the wind
technology development experience. The expiration of
the Production Tax Credit (PTC) in 2004, which is a key
incentive for wind power projects, caused a 77 percent
drop in installed wind capacity that year relative to
one year prior, 2003. By comparison, in 2007, with the
PTC in place, the wind industry enjoyed its best year
ever when developers installed more than 5,000
megawatts of new generating capacity, more than twice
the previous record. The ITC is expected to have a
similar effect on the solar industry. The tremendous
spurt of innovation, development and associated
economic activity we have seen with solar, and in the
renewable energy sector generally, could be squelched
if these tax credits are not extended. Needless to say,
the loss of this economic activity would occur just
when the national economy, buffeted by the housing
collapse and record energy prices, needs all the
support it can get.
The federal government can therefore make a
tremendous contribution by extending the ITC and PTC,
as proposed in H.R. 6049, and removing the regulated
utility exclusion associated with the ITC, as regulated
utilities are in a position to provide financing for
these capital-intensive projects. We believe the 8-year
extension for the ITC included in the recent Senate
package is the minimum amount of time necessary to
reduce financial uncertainty, spur longer-term
technology development and encourage fuller deployment
of these projects. Given the long investment lead-times
for CSP, an extension of 8 years would send a critical
signal to investors to commit to these projects. In the
absence of a long-term extension of the ITC, we are
very concerned that the projects currently under
development may be delayed, stopped, or priced in a way
that will raise costs to electricity consumers by up to
30 percent. We therefore urge Congress to pass the
provisions contained in H.R. 6049 as soon as possible,
so that the solar and other renewable industries can
have the certainty they need to make investments,
create jobs, and make a positive contribution to
meeting the nation's energy needs in an
environmentally-sound and sustainable manner.
B. The Transmission Challenge
Another significant challenge we face in bringing
renewable energy resources online faster is
transmission. In California, for example, most large-
scale concentrated solar power generating facilities
are sited in remote desert locations, far away from the
areas where the electricity is needed most. While
siting in these areas may avoid some, but not all,
issues associated with major power plant project
siting, if we can't get the power to the customer, it's
just a different kind of stranded asset. In fact,
Senate Majority Leader Reid noted in his statement on
June 17th before this Committee that the West alone
will need approximately 7,500 miles of new transmission
lines over the next decade to significantly expand
renewable energy production.
Transmission siting is a multi-stakeholder process
that is increasingly complicated in the case of
interstate lines, due to multi-state regulatory
requirements, myriad diverse stakeholder interests, and
a lack of deference to a lead federal agency. It is not
uncommon for a company to be far into the siting
process and have a single stakeholder raise an
objection which can stop the project's momentum `in its
tracks.' And actions by some federal resource agencies
can also have major ramifications. We support the
Bureau of Land Management's (BLM) desire for a
comprehensive approach to solar projects in the Mojave
Desert region and the west, and we appreciate BLM's
commitment to continue to process those applications
which have already been accepted. However, we hope that
future CSP projects are not further complicated by the
moratorium on new applications.''
Mr. Chairman, I couldn't agree more with your
statement at the June 17th Committee when you said,
``[t]o get transmission built to carry renewable
electricity, it's important to make sure that the
transmission system in general is working well. We need
to be sure that FERC's rules for planning, siting,
pricing, interconnection and openness of access are
adequate.''
C. Integrating Intermittent Power Supplies
A third challenge we face is the ability to integrate
an increasing amount of intermittent power resources
into our generation portfolio. Solar is much easier to
accommodate than wind in this regard, but it still
poses challenges. A solution to this challenge lies in
the ability ultimately to store excess power from these
power projects, so that it is available when the
project is not producing power--for example, on cloudy
days or at night--and thereby smooth out the `ups and
downs' that are otherwise associated with intermittent
power generation. Congress showed great foresight by
including a thermal energy storage research and
development program in Section 602 of The Energy
Independence and Security Act of 2007, and hopefully
this program will lead to improvements in the cost and
effectiveness of such technologies.
THE PATH FORWARD
At PG&E, we are working cooperatively with policymakers,
regulators, others in our industry and myriad stakeholders to help
tackle these challenges. For example, California's utilities are
working closely with state and federal agencies on the Renewable Energy
Transmission Initiative to identify areas that will require
transmission investments to bring on new solar and other renewable
energy supplies. We are working in a broad coalition, consisting of
more than 300 organizations to help support and advance the energy tax
provisions contained in H.R. 6049. We are working to identify and
support emerging renewable technologies, like CSP, biogas, and wave
technology, to help bring down costs and integrate these technologies
into the electric power and natural gas systems. And, we are investing
more than a billion dollars in advanced meters to upgrade our electric
grid to make it a dynamic, ``smart'' system that will allow us to
optimize its performance and better integrate these new, clean
technologies, including advanced transportation technologies like plug-
in electric vehicles.
In these uncertain times of rising energy prices, a weakening
economy, and increasing national security risks from dependence on
foreign oil, the federal government is well positioned to bring
certainty to the energy market through sound policies that send the
right long term signals that will spur the innovation, development, and
deployment of renewable, clean, domestic energy resources that are so
desperately needed. The opportunity to expand the renewable power
industry can only be accomplished by addressing the challenges facing
it in an integrated, strategic fashion that blends incentives,
standards, public sector investment, and other key mechanisms such as a
price and market for carbon, a major step that will allow renewables to
compete against the real costs of conventional sources of electric
power generation.
On behalf of PG&E, I want to thank you for the opportunity to
appear before the Committee today and I look forward to answering your
questions. Thank you.
The Chairman. Thank you all very much for the good
testimony.
Let me just start and ask a few questions, and then we will
sort of take 5-minute rounds here and go back and forth on
questions.
One issue that I am not real clear in my mind on is how you
accomplish the storage requirement that we are all talking
about here. I think, Mr. Morse, you said that the proposal or
the project that you are doing with Arizona Public Service
involves 6 hours of storage. I think that is what Mr. Nelson
indicated they would like to see as well.
I don't know if you would like to explain how that storage
is accomplished, or Mr. Andraka, if you would like to explain
it? One of you who understands a little more of the technology
involved, I would be anxious to hear it.
Mr. Morse. Let me take a stab at it. Imagine that you like
coffee and you want coffee in your office at night, and you
can't boil the water in your office. So what do you do? You
boil more water in the daytime. You put it in a thermos, and
you use it at night.
A CSP plant has an oil that runs through the plant that
gets heated up to 700, 750 degrees Fahrenheit, and that hot oil
makes the steam that runs the generator. If you expand the size
of the solar field, then some of that collected energy goes not
to make steam and run the plant in the daytime, but it goes
into large, very large tanks of a fluid that has the heat
capacity that can hold that high temperature.
Then at night, when the Sun goes down, you just run that
fluid through a steam generator, make steam and run the power
plant. So it is basically two large thermos bottles, one with
hot oil that then runs and makes steam and then is collected in
another tank, which is then heated up the next day.
The Chairman. Very good. This will allow you to extend the
production of electricity for about 6 hours after the Sun goes
down?
Mr. Morse. Correct. You could do it for 8 hours or 10
hours. You could run it around the clock. It is all the
economics of the utility's needs. But it is feasible to make
CSP a base load option if the economics made sense.
The Chairman. I think one of you indicated that by putting
this additional storage capacity in, you do bring down the cost
of the electricity per kilowatt hour. Is that the expectation?
Mr. Nelson. Yes, sir. We believe, based on the EPRI study,
that the inclusion of storage has the opportunity to reduce the
overall cost of the process. In addition to helping us address
peak load needs in the evening, there is also some
opportunities to allow that plant to startup earlier in the
morning.
So, for instance, if you were hitting a winter peak early
in the morning, that plant could be up and running and
generating electricity even before the Sun generates enough
heat to generate electricity. So it serves a couple of our
needs in terms of peak load.
The Chairman. OK. Yes, go ahead.
Mr. Andraka. Senator, the labs are also working on advanced
storage technologies. The technology that Dr. Morse talked
about where you heat the oil and that, in turn, heats the
storage fluid, we would like to extend that where you can
directly heat the storage fluid in the field.
The issue there is the storage fluid right now freezes at
about 200 degrees C. We have got new formulations we are
working on that will stay liquid to a lower temperature so you
don't have freeze issues in the field.
Mostly, we talked about trough systems today. An advanced
technology is a tower system, where you are directly heating
the salt in the receiver at a central point rather than
throughout the field. So it gets rid of this distribution
problem. We see storage as an inherent solution in towers as
well as troughs.
One of the issues that also has to be addressed with
storage is the contracts with the utilities that, in some
cases, are regulated by the State that pay a certain amount at
time of day. The storage increases the value of the electricity
for the utility when they need it, but they need to be able to
pass that value to the provider since we are looking at
independent providers.
The Chairman. OK, let me ask one other question that is a
little different from that.
Mike, you were talking there about--or maybe you weren't
discussing it, but my understanding is that you are working on
trying to develop an agreement with Kirtland Air Force Base on
a power purchase agreement, something that would use power that
might be produced at Mesa del Sol. Could you explain how that
would work, how it would fit into the various other things we
are talking about today?
Mr. Daly. Mr. Chairman, currently it is my belief that the
base provides power to its tenants, which includes Sandia Labs,
and that base negotiates a multi-year contract with WAPA, who
acts as agent throughout, and both provide renewable power as
well as traditional power on the wholesale market.
That contract might be--it is difficult to say what the
renewable would be, but was 6 cents a kilowatt hour. It might
be 7 or 8 cents going forward because of the increases. If DOE,
as a tenant, decided that they wanted to take a portion of
their load, 30 or 40 megawatts out of the total of 50 with the
military being the balance, they are constricted for two
reasons.
The first reason is they can't enter into a contract by law
for more than 5 or possibly 10--there has been a recent event.
It might be 10 years now power purchase agreement.
The second is that the proxy or the pricing under the OMB
is that they have to match the lowest bid. Concentrated solar
will never be the lowest bid today. But over that 30-year
period if you have an extension of the power purchase
agreement, or even 10, if you took into consideration an
increase projected of fossil fuel cost, then they would be able
to enter into that contract.
So there is a real OMB constraint and a contractual
constraint preventing the biggest proponent of concentrated
solar from actually being a buyer of concentrated solar for
their own needs. This base and possibly other military
installations have unique loads that really don't go down at
night, too.
So we have actually worked a little bit on trying to
straighten this out as a long-term possibility for DOE. But now
that PNM has gotten the bulk of their requirement with the
other utilities to 111 to 120 megawatts, we have a big enough
plant. The original thought was that PNM's requirement wasn't
big enough, and we would marry the DOE requirement and the PNM
requirement to get the plant big enough because you have to do
at least 120 megawatts.
I think long term it is both a policy and an opportunity.
It is a great opportunity beyond having an additional generator
backing up the entire installation here, which you could throw
a switch and say they get the power first.
The Chairman. OK. Senator Domenici, go right ahead.
Senator Domenici. Mr. Chairman, I want to tell you I don't
know how long you intend to continue, but I have no objection
to your continuing if I am absent. I can't be here beyond
11:30. So that is 10 minutes, and you understand why. It has to
do with my being present tomorrow.
Let me say that I have the cost of electricity by source
per kilowatt hour, and I just want to make it a part of the
record so it will be without a doubt.
We are getting there in terms of the solar we are talking
about, the solar CSP. Obviously, we have got a ways to go, but
I believe we will become more and more competitive if we get
this--we can break it loose where it is not such an isolated
job, but rather a contemplated and well-organized part of every
utility that contemplates expanding so that they look at this
first.
Not mandatory because we don't want to do that. But they
look at it, and it is doable when we haven't put obstructions
in. So I would like that to be in there.
Second, I did want to call to your attention, Mr. Chairman
and this group of witnesses and our visiting Senator, the
Albuquerque Journal seems to have gotten the understanding on
what is going on. They have written about three editorials here
in a row that impressed me with their understanding of the
problem we have with crude oil dependency, which is slightly
different than most people understand.
You know, we can't get out of oil for a long time because
we can't get rid of our cars and our trucks. We are going to
try, but that dependency is going to be there for a long time
just because of the transportation and transportation users in
place. You couldn't load up all the cars and put them out in
the ocean on barges and ship them out, then we would leave an
America that was dead on its toes.
It may be 30 or 40 years until dependence. That is
terrible. I must say that every hearing I am going to be at, I
am going to talk about a completely different view of our crude
oil dependency. I think it is destruction we are talking about.
It is destroying the economy--look--$500 billion a year to
other countries for our crude oil is not an issue of, ``Well,
it is not too bad.'' The point of it is the whole economy is
suffering, and we don't quite know why, and that is it.
The reason our economy is in terrible shape is because of
this. We are sending too much of our lucre, too much of our
would-be equity, too much of our money to others just for this
one thing.
Now, what I am concerned about, Mr. Chairman, and you are
going to be there a long time to try to organize, I think we
have a lot of institutions in this country that aren't onboard
as partners in trying to get where we ought to go.
For instance, there is a lead editorial here, ``Killing
Energy Options Will Leave Us In The Dark.'' It is about a $400
million investment that was going to take place of the kind you
were talking about, Mr. Daly. It was going to be made in
California, and it is about to die because the transmission
line to make it operational is 23 miles long and must cross a
State park.
There was a group who loves the State park so much that
they have killed the project by saying you can't cross our
park. We all are environmentalists. Maybe you on the record
more than I. You more, but we all are.
But we have to have the environmentalists join up, too.
They have to be concerned about the problems we are concerned
about. This plant in this editorial must proceed. I am going to
bring it up and have our committee find out why we stopped a
$400 million solar plant with a 2-mile transmission line.
I don't see how that could hurt a State park unless there
was a big cable right over a picnic area. You know, this is a
big park. So, I just want to make that case and put that in the
record, Mr. Chairman.
The Chairman. We will be glad to have all of that in the
record.
Senator Domenici. Second, I would like for you all to know
that the Bureau of Land Management is called a lot of things,
and they are unable to do a lot of things we all want them to
do. In this case, they are in the midst of a real argument, and
we have to help them, I think.
They need some policy advice. They are left there with
hundreds of applications, and they don't have a lot of help
because they are not used to 100, 200 applications for a great
big solar plant on BLM land. We don't want them to be the
killer, right? We want them to be facilitators. But we have got
to find out how they can help.
Did any of you run into this, just specifically, the BLM
problem? Or is--yes?
Mr. Morse. I could make one comment that I think is
relevant and that is causing a lot of the problems. There are
three types of projects. There are real projects, a signed
power purchase agreement with a commercial operation date--
2012, 2011. Those plants have to be built, and if they want BLM
land, their applications should be considered immediately.
Then there are projects that are maybe. Somebody applies
for land for something that is still in their mind. They don't
have a power purchase agreement. That is a real problem because
you can fill up the queue with that.
Then there are the speculators. Let us just be honest about
it. There are people with money who say that land is going to
be worth something, I will put in an application. It is like
grazing land without a cow. I think those are parts of the
problem, and I think BLM overreacted.
Senator Domenici. OK. Let me just say I have been informed,
and that is what this whispering was, they have changed their
policy. So, maybe we had an impact and maybe we didn't. Your
concern on the BLM is no longer there----
Senator Sanders. Do I understand that you are just telling
us that they have lifted? They are not going to pose a
moratorium. All right. We have some good news, good news.
Senator Domenici. That is good news, and I don't know how
they are going to handle the vote. But anyway, I am grateful
and that is nice that you called this meeting. That probably
caused it.
[Laughter.]
Senator Domenici. My last point, Dr. Marker, I have never
had a chance to thank you for your decision to come here. We
are really glad to have you.
We hope that we have put in place the policies that will
make your business thrive because that will be good for the
country. In this case, we have got a winner. You win. The
country wins. We win. So let us hope it happens.
But I would say to my friend, the chairman, there is
probably not any better testimony than yours and yours, Mr.
Daly--Marker and Daly--to support the proposition for the tax
credit that we are looking for, that we want an 8-year
extension. It is not the tax credit. What is it called? The
investment tax credit.
There is probably not a better record than yours that
clearly states that we don't have to worry about paying for
this ITC. It is more than paying itself with growth that you
are talking about.
Now I know my friend, Senator Bingaman, who I have great
respect for his understanding and rationale, and he will answer
that we are going in debt and how much more can we put on our
grandchildren? I know all about that. I did that budget for 28
years for the Senate, and I did two of those balanced budgets,
you know?
But, look, the point is we already have a policy of some
sorts that will put this tax in place without an offset because
it pays for itself. Look, you are telling us in your testimony
that that is really true.
Anyway, I want to put this editorial in the record to
remind us that transportation issues are important, and I want
to close by saying to all of you we put into national law, you
know, this business that I told you about in my opening remarks
when you run into a wall, you pull it, take it away from the
group that is arguing. You take it up with the secretary, and
he sends it over to the commission, and they decide. We are
catching all kinds of flak that we shouldn't be infringing upon
these rights.
I want to tell you that that galls me. When I read in this
Journal editorial that you are holding up a $400 million
project in the State of California because an environmental
group won't allow a 23-mile pipeline, I think the
environmentalists have to join us. We need them.
But anyway, I think this hearing ought to be one that ends
up saying right away this is very important, and we urge
Americans to act like Americans on some of these issues and get
rid of the parochialism of their cause and let it get in there
and get solved, or the same thing is going to happen with
nuclear.
I don't know if you are for it or not, but Senator
Bingaman, at least he and I put in place what nuclear needs,
just like we put in place what you need. Nuclear is going to
come forward, and it is going to run into just what you are
saying. We don't have enough trained people. We don't have
enough engineers.
I never heard of solar engineers. But if that is a new
doctorate or you have one? That is you?
[Laughter.]
Mr. Andraka. There is one.
Senator Domenici. One. Where did you get trained?
Mr. Andraka. Virginia Tech.
Senator Domenici. Virginia Tech. Do they give you a degree
in solar?
Mr. Andraka. Mechanical.
Senator Domenici. Oh.
Mr. Andraka. I have become a solar engineer.
Senator Domenici. You can become that from mechanical. OK,
well, that is what you are urging. You are going to get a seat
in mechanical. How much does it cost to put one of those chairs
in?
Mr. Daly. Too much.
[Laughter.]
Senator Domenici. I don't know. You are making a lot of
money. You have got the best land deal anybody ever got.
[Laughter.]
Senator Domenici. I mean, I know your chairman. What is his
name?
Mr. Daly. My chairman is Albert Ratner.
Senator Domenici. Yes, he is great. Whenever you worry
about me not being on your side, you send him over.
Mr. Daly. I do. I do.
Senator Domenici. He is terrific. He is terrific. I
understand him when he says he knows how to invest, and let him
do that and we do some other things. I am all for it.
Mr. Daly. Thank you, Senator.
Senator Domenici. Anyway, you have got to be in this
business--if you are going to run that big piece of land, you
have got to be urging that people join together, right?
Mr. Daly. Correct, Senator.
Senator Domenici. Get some of their concerns, private
concerns to join the cause.
Mr. Daly. Correct. I think the point there is no one person
that can solve this. It is a collaborative effort with the
utility, the States, and also the PRC has got some things they
have to do to really allow us to do this.
Also the consumers have to recognize that green is going to
cost them a little bit, too. It might be 25 cents a month on
their electric bill, but we have got to get over that and go
forward with it.
Senator Domenici. With that, Senator, Mr. Chairman, I am
going to leave. I will let all these wonderful New Mexicans and
you solve the rest of the problem.
The Chairman. Senator Sanders and I will solve the problem
and report back to you.
[Laughter.]
Senator Domenici. You won't even need anything from me. Get
it done.
The Chairman. All right. OK. Thanks for being here.
Bernie, why don't you go ahead with your questions?
Senator Sanders. OK. First of all, it is, in fact, very
good news, I think, to hear from the BLM that they have
withdrawn their proposal to establish a moratorium on new
applications. Maybe it is coincidental that it may have
something to do with this hearing, but we are delighted that
that is the result.
But one point that I want to make, and I want to ask the
panelists about that, is while we are delighted with the BLM's
decision today, what I hear is that they have just a very few
staff people who are trying to process these claims.
So all of you are talking about the need to reverse global
warming, to create hundreds of thousands of new jobs, to make
ourselves energy independent, and every one of you is saying
that concentrated solar is going to be an important part of
that process, and we have a bottleneck with two guys who are
sitting there trying to process all of these applications.
So I am going to ask you a rather silly question, but do
you think we should substantially increase the staffing at BLM
so that they can process these applications in a far more
vigorous way?
Mr. Morse, do you want to start on that one?
Mr. Morse. Of course.
Senator Sanders. Mr. Wan.
Mr. Wan. Absolutely.
Senator Sanders. You agree. Dr. Marker, do you agree with
that? All right. OK.
One of the concerns that we have, and maybe one of you may
want to go into it, I believe there are 130 applications in the
pipeline. My understanding, and correct me if I am wrong, is
not one of them has been approved yet. Is that----
Mr. Morse. That is what my understand is.
Senator Sanders. OK. So all of you are in agreement that we
should substantially increase the staffing at the BLM to
process these things.
Mr. Morse. I would also add I think that it is a complex
issue. There are land management plans that have to be revised.
I will say that BLM is being very positive. They are trying
to identify zones in the West that are ideal for solar energy.
They are working with the environmentalists to make sure there
are no wildlife corridors. They are going to do a programmatic
environmental impact study. So they are trying to do the right
thing, but they are understaffed. Certainly, more people would
help, and they probably could use some other policy support
along the way.
Senator Sanders. Mr. Chairman, the other question that I
wanted to explore is the comparative cost of solar. By the way,
yesterday I was in Nevada, and it is very hot in Nevada. You
know that. I am from Vermont. I didn't know that. But 110
degrees is very hot.
[Laughter.]
The Chairman. That is why we are in New Mexico.
Senator Sanders. You are right. I know that you have been
talking, Mr. Daly, about working with your local base here. I
was at Nellis Air Force Base, and I want to say that they have
installed in a very rapid time, in about a 6-month period, not
a concentrated solar plant, but it is the largest photovoltaic
in the world.
It came in on budget. I think they did it in 6 months'
time. It is producing more electricity than they anticipated.
It is going quite well, and they have the capacity to produce
even more. It was very nice to see a very positive relationship
between the Air Force and the private sector and the
environmental community. That is a very good omen, I think, for
the military in general.
Let me quote--well, not quote, but my understanding, Mr.
Andraka, is that according to a 2008 Sandia National Labs
presentation, our costs for concentrated solar are projected to
drop to 8 to 10 cents per kilowatt hour when capacity exceeds
3,000 megawatts. Is that your understanding?
Mr. Andraka. Yes, that is correct. That is based on a study
done for the Western Governors Association, which also goes
back to the Sergeant and Lundy report. DOE right now is funding
an update to that Sergeant and Lundy report that will include
dishes and update the cost estimates for troughs and towers.
Senator Sanders. Now tell me what I am missing here, but
that sounds to me to be pretty reasonably priced electricity.
The other point is that if you look at it over a 25-year
period, it is not going to go up a whole lot, we don't think--
unless Exxon buys the Sun or something.
[Laughter.]
Senator Sanders. That it is not going to go up too much. Is
that right?
Mr. Andraka. The cost in a given plant will only go up with
the labor----
Senator Sanders. Right.
Mr. Andraka [continuing]. Once the plant is put in place.
Obviously, the plant depends on the cost of commodities, such
as glass----
Senator Sanders. But my point is, and I think PG&E--and we
talked about that as well, with Mr. Darby to help us, is that
if you look at 8 to 10 cents a kilowatt hour, and you sign a
25-year purchase agreement, 25 years later, 10 or 11, whatever
it may be, that is going to be pretty cheap electricity.
Am I missing something, or is that correct, Mr. Andraka?
Mr. Andraka. That is correct. Usually these contracts will
have some inflation escalator built in, but we see the cost of
natural gas going up a lot more rapidly.
Now in the last decade or so, the cost of natural gas was
seen as cheap as far as we could see it, and that has been one
of the impediments to rolling out----
Senator Sanders. Right. But compared to the volatility of
gas or oil, the Sun is going to be reasonably stable?
Mr. Andraka. Yes. Yes.
Senator Sanders. Mr. Wan.
Mr. Wan. I think I would like to offer that even with
conventional power plants, as they are facing the increased
costs, there are still cost of raw materials, of the concrete.
The conventional power plants are facing an increase of roughly
20 percent in cost. I would expect renewable generation,
including CSP, to be facing that type of cost pressure.
Senator Sanders. For construction?
Mr. Wan. For construction, absolutely. That is without the
impact of natural gas prices. Once it is in, it is minimal
replacements on the mirrors as well as the tubes, and you are
absolutely right.
Senator Sanders. Maybe Mr. Morse or anybody else would want
to comment? I mean, there are a lot of things and you have said
it all about why we should be moving forward in an aggressive
manner for concentrated solar. But cost may, in years to come,
be one of the reasons. It may be a very competitive product.
Mr. Morse.
Mr. Morse. In fact, Arizona Public Service, when asked why
are they spending a little more for CSP today, the answer was
it is a fixed price. It will never rise. They have no idea what
natural gas will cost next year, 5 years, 10 years, if we will
be able to burn it. It is a hedge against that.
Not only is the price fixed, when the debt is paid, there
is no fuel cost--unless Exxon buys the Sun. If there is no fuel
cost, it is a few cents a kilowatt hour. It becomes a clean
cash cow. It is like a hydro plant that is paid for, but it is
clean. Any utility that owns one of these, like PG&E, will be
very happy that they have it.
So it is a very sound investment. The fact that it is a
little costly now, that is what the ITC is helping to deal
with. But as an investment, it is the most prudent investment
that the country can make, and a lot of renewables have this
same factor. They don't have a fuel price issue.
Mr. Wan. I would like to just offer a few numbers to
illustrate the point. For example, if a natural gas combined-
cycle power plant today is producing energy at roughly 10
cents, probably 40 percent of that is from the fixed cost of
construction or maintenance, and the other 60 percent or so
will be coming from the price of natural gas.
So Mr. Morse's point earlier, that 6 cents could be quite
volatile in the future, and in his example, if CSP cost more
than 10 cents today, but you are essentially locking in that
number. Maybe it would be 11 or 12 cents. But you are far
safer, from a portfolio management perspective, to have some
CSP in your portfolio.
Senator Sanders. Mr. Chairman, may I ask----
The Chairman. Sure.
Senator Sanders. OK. We have been focusing, appropriately
enough, on the huge potential of concentrated solar. When I was
at Nellis, I was also impressed by the use of photovoltaic. So
we talked to some people in the Energy Department a couple of
months ago who surprised me by saying that they expect
photovoltaic costs to also go down very substantially in the
coming years and for people to install them on their rooftops.
California has had good success, New Jersey. Germany
certainly has gone off the wall on this. What do you guys see
as the potential of photovoltaics in the energy mix in this
country?
Mr. Wan. As I mentioned earlier, we are in the final stages
of negotiations with several of the PV developers, including
the one at Nellis. The numbers they have all asserted to us are
surprisingly low. We have thought for quite a while that CSP
would be the future without any question, and I think PV is
going to give CSP a run for the money. I think that is
ultimately in the best interest of our consumers, for all
Americans, as you have more competing industries and
technologies to bring down the cost.
I think the key to photovoltaic today is not necessarily
the efficiency of the panels or cells or to bring the cost
down. It is actually the worldwide logistics of parts as well
as the installation. That is why you see large-scale
installation such as at Nellis.
Senator Sanders. The beauty of PVs is that while in the
Northeast we are not going to be installing in the near future
concentrated solar, we can be heavily utilizing PVs.
I mean, Germany is not an optimal location for solar
exposure. It is nowhere near what it is here, for example. But
New Jersey and other States, and we are trying to do this in
Vermont, is to expand the use of PVs.
So you see great potential there as well?
Mr. Wan. We see great potential. We are very hopeful.
Senator Sanders. Yes, Mr. Nelson.
Mr. Nelson. Senator, I would like to give you our
perspective on that. We actually are going to have another
renewable energy RFP go out in the August timeframe. With that,
it is going to be more of a general renewables RFP that we
expect will include proposals related to PV, to biomass, to
geothermal. We believe that PV plays a significant role in the
renewable energy mix.
At this point in time, we believe that is more of a
distributed role. Not just distributed in terms of rooftops,
but megawatt scale located throughout the system to support
distribution and that sort of thing. We are not yet, at this
point in time, convinced that hundreds of megawatts in a single
location is the most appropriate use for PV due to the large
ramp rate associated with that when cloud cover comes over.
Senator Sanders. Mr. Andraka.
Mr. Andraka. I would like to echo the comments of Mr. Wan
on the photovoltaics. One of the barriers is the interconnects,
the field installation. One of the areas the laboratories are
working on is modular systems, where you have got the PV built
into a module and combined with an inverter. So it is an AC
module that bolts into place to simplify and reduce the cost of
the field installations.
Senator Sanders. Mr. Chairman, thank you very much.
The Chairman. Thank you very much.
Let me ask one issue that is always at the forefront here
in the Southwest and New Mexico is water. Is there a
significant issue of water usage in connection with a CSP
facility like the one you are doing in Arizona or like the one
PNM is proposing to do here?
Mr. Morse. It is all a problem of the French. Mr. Cugnot
burdened us with the need if you have a heat engine, a steam
turbine, you have to cool. You have to condense the fluid. A
CSP plant, a trough plant or a power tower, is the same as any
conventional plant. Coal, nuclear, doesn't matter. So we use
the same amount of cooling water per megawatt.
We could go to completely dry cooling, air cooling. The
cost would go up about 10 percent, and the performance, worst
of all, would go down. During the hottest peak time, we would
lose more performance. The solution that a lot of CSP
developers are looking into is hybrid cooling, where we do dry
cooling except during the very peak time, the hottest time,
when we use a little bit of cooling water.
So I think that if the Southwest wants to have its future
plants without water cooling, it can be done, and it is a
matter of both a little cost and a little performance.
The Chairman. Yes? Mr. Nelson, do you have a point of view
on that?
Mr. Nelson. Yes, sir. I would point out that our RFP
actually requires that the vendors propose both dry and hybrid
cooling options. We allow them to propose a wet cooling option
as well, but we believe that the dry or hybrid is probably the
way we need to go because of sustainability reasons. Water is a
significant resource for us.
The Chairman. On this issue about the cost per kilowatt
hour, as I understand, one of these concentrated solar
operations--concentrating solar power plants, one of the great
advantages is that it is producing the power when you are at
your peak as far as demand. At least in the summer when people
are using their air conditioners, you have got the most power
going into the grid at that time.
How does that factor in? First, tell me if that is true as
one of the advantages that concentrated solar has over wind
power, for example. You just can't predict when the wind will
blow.
Second, how does that relate to this cost per kilowatt hour
issue? Because you have real-time pricing being factored in by
Public Utility Commission, where you are charging a higher
price per kilowatt hour during the peak periods, and you are
producing this power even if it is more expensive during peak
periods. How does all that fit together?
Mr. Nelson. We currently in New Mexico do not have peak or
time of day pricing here, although that is certainly an option
for the future. Solar power, however, does more closely meet
our peak than wind power does, although it is not a perfect
match. That is why we believe storage has the option to get us
through our true peak, which is generally when people are
coming home at the end of the day, turning on their air
conditioning, turning on the TVs, the computers, the stoves,
and that sort of thing.
So storage can help us get from that 5 o'clock to 8 o'clock
at night type peak. But solar does match it much better than
wind. What we know here in New Mexico is we have a great wind
resource. However, the windy days are rarely the very, very hot
days here in New Mexico.
We generally see our greatest wind resource in what we call
the shoulder months, the springs, the falls. At nighttime,
where our load demand is significantly less. So, again, from
that perspective, solar better matches our peak.
The Chairman. Yes.
Mr. Andraka. We do see quite a diversity in the load
profiles. For example, the Phoenix area, the peak extends maybe
to 8 o'clock or 9 o'clock at night, and their request for
proposals specifically require storage, and the plant that Dr.
Morse proposes includes 6 hours of storage because of that
requirement.
At the same time, the Southern California plants are not
requiring storage. Their peak is a closer match to solar, still
not a perfect match. But they also have significant wind
resources, and those wind resources really start picking up
every evening with the breezes off the ocean. So, in
California, we see a portfolio of renewables in meeting that
need.
Now as the solar resources are exploited and become a much
greater portion of the grid, I think we will see more and more
in California the need for storage, at least for the
intermittency as used, if not the shifting.
The Chairman. OK. Yes, Mr. Wan.
Mr. Wan. Getting back to your question on the pricing, what
you were hearing earlier is the average price. In California,
we do pay a time of the day, time of the use value pricing. So
that means if you are producing at the peak of the day, you can
get up to 150 percent of that price that you heard earlier.
Similarly, if you are producing like wind in the middle of
the night, you may get a lot less than that pricing. CSPs, we
find, are critically dependent on the higher pricing for the
power they produce over the peak of the day.
The Chairman. So you think that the time of day pricing
that you have in California makes a lot of sense as you go to
something like more power production from solar?
Mr. Wan. Absolutely.
The Chairman. Right.
Mr. Wan. Absolutely. Appropriately also pays the other
technology less when they are not producing at the right time.
The Chairman. Mike, did you have a comment?
Mr. Daly. I just think, as I am listening--I can't speak
for the other colleagues here--the not having a strong research
program in solar storage, while it has been implemented in two
or three situations in a solar tower, is the Achilles heel of
the solar--concentrated solar business because if we can't
store it, then we have to build gas plants to back it up
anyway, and you are double-building capacity, which is going to
hurt the rate bearer.
So as you look at research dollars, the solar storage
really makes a big difference in this business. Then the second
step is getting the local PRC to start doing time of day
pricing so you start having market-driven consumption, which
will add to the efficiency. But that is more of a local issue.
But storage is really important, and while it has been
implemented, it is not widespread proven technology. It is a
credit risk, and it is expensive to do it.
The Chairman. Senator Sanders, do you have other questions?
Go ahead.
Senator Sanders. Just maybe one more, Mr. Chairman. To
reiterate, I think this has been a very productive hearing, and
I want to thank you for calling it and all of the panelists for
being here.
My last question has to do with your views on a national
renewable portfolio standard. My understanding is that New
Mexico is moving to 20 percent by the year 2020, Nevada 15
percent by the year 2013. Other States have gone forward more
or less significantly. We tried, and we lost by one vote, was
it?
The Chairman. It was close, yes.
Senator Sanders. One or two votes. It was 15 percent, I
think, right?
The Chairman. It was 15 percent, right. By 2020.
Senator Sanders. Right, 15 percent by 2020. What impact
would a national renewable portfolio standard have on the solar
industry?
Mr. Andraka.
Mr. Andraka. As we mentioned earlier, the primary resource
is in the Southwest United States. So I think our States would
be at a distinct advantage in taking advantage of the solar
resource. Your meeting a few weeks ago on transmission
capability needs to also look at transmission across the
country, totally different grid technology to bring this
resource to other parts of the country.
Senator Sanders. We have got a lot of work to do on that.
Mr. Andraka. Yes.
Senator Sanders. Yes, Mr. Wan.
Mr. Wan. PG&E has been a long supporter of the adoption of
a national renewable strategy. We believe it should be
uniformly applied. I think the most important part is that a
national RPS policy will actually accelerate development and
bring down the cost with greater scale and just move us so much
faster and so much closer to the clean energy world that we
would like to see.
Mr. Morse. I would like to add a word of caution, however.
I think the word ``portfolio'' has to be looked at carefully.
It could be a wind standard very easily because it could go to
the lowest cost, and at the moment, that is the lowest cost.
But the value for the utilities has to be considered.
So I think, No. 1, it should not harm what may be more
aggressive State RPSs or RPIs, whatever the plural is. I know
that there is hesitancy about carve-outs, but a lot of solo
ones exist because they had a percent had to be solar. I know
that that is a contentious issue. But I think if you do have a
national portfolio standard, please be very sensitive to how it
will be implemented.
For the life of me, I never understood States who pass a
State RPS for generation without thinking a bit about
transmission or enough about transmission. So think about if
you were to require X percent new generation from renewables,
how on earth is that going to get to the load centers?
Senator Sanders. Thank you, Mr. Chairman.
The Chairman. All right. Thank you all very much. Thanks
for your testimony. I think it has been very useful. We will
take all this information and try to put it to good use.
Thank you. That will conclude our hearing.
[Whereupon, at 11:59 a.m., the hearing was adjourned.]
APPENDIX
Responses to Additional Questions
----------
Responses of Michael Daly to Questions From Senator Domenici
Question 1. I understand the DOD will be contracting for this
power. Now that they can enter into 10 year contracts for renewable
energy instead of just 5 years, will the Defense Department extend its
contract with Mesa del Sol?
Answer. We met with DOD in New Mexico for the past 2 days. They are
hesitant to pay a premium for concentrated solar, i.e. greater than 9
cents per kilowatt hour. They have agreed to work with us and the City
of Albuquerque to look into developing a plant possibly in conjunction
with the PNM RFP. It is our position to combine the load of the base
and the New Mexico utility companies which will result in the lowest
possible costs for solar thermal. While a longer contract is
preferable, 10 years would be sufficient.
Question 2. How are you handling the project's thermal storage?
Is there room to expand at your site between Sandia and Kirkland
AFB?
Answer. We are proposing 3 hours of solar thermal which is
consistent with the PNM RFP. The entire site between Mesa del Sol and
Kirkland AFB is approximately 2,700 acres which is more than sufficient
to accommodate an excess of 400 MW of concentrated solar. We are
proposing to start at the northerly end of the site and development to
the south. To the extent the full site was developed, we would have to
coordinate with the Base to make sure we wouldn't impact the rocket
sled or other Sandia missions.
TRANSMISSION
Question 3. In the 2005 Energy Policy Act, Congress sought to
address the critical issue of transmission siting through the National
Interest Electric Transmission Corridor process. Even though these
provisions haven't been fully implemented, and no line has been sited
pursuant to EPAct, the NIETC process has proven controversial. Still,
everyone here today has highlighted the critical need to bring more
transmission on line to transport these renewable resources to load.
Just this past weekend, the Albuquerque Journal ran an Op-Ed
criticizing environmental groups--who want the ``green'' power but not
the infrastructure that goes with it--for opposing needed transmission
lines.
What more should Congress do in this important area? Some have
called for Congress to provide FERC with exclusive jurisdiction to site
new transmission for a renewable project. Please comment.
Answer. Where transmission corridors are required to promote
renewable energy and there are not other economically viable paths,
FERC should have power condemnation after conducting public hearings.
ITC
Question 4. One of the most important issues facing the solar
industry today is that the tax credits we passed in a bipartisan manner
are set to expire. We must enact a long-term ITC extension as soon as
possible. However, for the first time in the renewable tax credit
history, the House Majority is insisting that the tax credits be
``offset'' by tax increases on other industries.
Many of you have submitted testimony highlighting the tremendous
economic boost the ITC provides the solar industry. According to Dr.
Marker from SHOTT, solar capacity additions in 2007 contributed $2
billion to the U.S. economy, creating 6,000 new jobs. And, it's
forecasted that if the ITC is extended, 62,000 manufacturing and
distribution jobs will be created.
Do you agree that these tax credits ``pay for themselves'' and
therefore don't need to be paid for by raising taxes on other
industries? Is the renewable industry concerned that this new ``pay
for'' requirement can set a troubling precedent in that offsets will be
required each time the existing tax credits expire?
Answer. The ITC should be extended to 8 years at a minimum, offsets
should not be required to pay for the ITC as an impact on the economy
will more than pay for any tax credits extended.
SOLAR RESOURCE POTENTIAL
Question 5. We currently have just over 400 MW of CSP installed
capacity in this country, at a rate of about 16 cents per kilowatt-
hour. A recent study suggests that solar energy could grow to 10% of
the nation's power by 2025. Do you agree with that assessment? If so,
what percentage will CSP contribute as opposed to Photovoltaic? Also,
how long will it take to get solar power costs on parity with
conventional power sources?
Answer. I agree with the assessment. We believe that CSP's will
represent the majority of the grid scale solar generation and that
photovoltaic is better suited to distribute energy primarily due to the
fact that there does not seem to be a short term solution to storage
for photovoltaic's vs. concentrated solar which has commercially viable
options that can carry a plant's generation capacity through peak
demands in many markets.
______
Responses of Frederick H. Morse to Questions From Senator Domenici
Question 1. I understand that you have a new 280 mw trough CSP
project under development in Arizona and that this project will have a
thermal storage component. How much cost does that add to the plant?
Does the addition of storage capacity improve the project's economics
since you'll be able to increase power generation over a longer period
of time? Why didn't the recent Nevada CSP plant include thermal
storage?
Answer. The addition of six full load hours of thermal energy
storage at the 280 MW Solana plant will increase the capital cost by
approximately 15-20%. However, by adding thermal energy storage, the
cost of the electricity generated by this plant will decrease and the
value of that electrify to Arizona Public Service increases
significantly because it can be used when it is most needed. I do not
know why Nevada Solar One did not use thermal energy storage but
perhaps the utility wanted a peaker and did not value enough the
ability to shift the electricity generation to other times.
Question 2. The site location for the Abengoa plant is located near
an existing transmission line. Would you be able to proceed with this
project absent that line?
Answer. No, not at this location. If we were to site Solana at
another location in order to access transmission, we would need to
determine if the added cost of wheeling or additional interconnection
would make the project uneconomic.
Question 3. Do you expect your plant to take the typical 7-8 years
to be completed? How long did the recent NV plant take to come on-line?
Answer. Solana is now expected to come on line in 2012, provided
that the ITC is extended very soon. I do not know the time it took for
Nevada Solar One to come on line.
TRANSMISSION
Question 4. In the 2005 Energy Policy Act, Congress sought to
address the critical issue of transmission siting through the National
Interest Electric Transmission Corridor process. Even though these
provisions haven't been fully implemented, and no line has been sited
pursuant to EPAct, the NIETC process has proven controversial. Still,
everyone here today has highlighted the critical need to bring more
transmission on line to transport these renewable resources to load.
Just this past weekend, the Albuquerque Journal ran an Op-Ed
criticizing environmental groups--who want the ``green'' power but not
the infrastructure that goes with it--for opposing needed transmission
lines.
What more should Congress do in this important area? Some have
called for Congress to provide FERC with exclusive jurisdiction to site
new transmission for a renewable project. Please comment.
Answer. More transmission is absolutely essential for moving
renewable energy generated electricity to load centers. Its absence
will certainly limit how much renewable energy can be developed. There
is a clear need for some way to deal with the conflict over who can
decide what lines get built and where. However, concerns about
reliability and economics militate against granting renewable suppliers
such a mandate. Additionally, the Energy Policy Act of 1992 prohibits
discriminatory use of the transmission system and therefore requires
all generation resources equal access and use of the transmission grid.
The transmission system needs to be designed to integrate all
sources of generation, in addition to renewable resources, into the
entire system and managed as a whole, to be efficient and maintain
reliability. To achieve a high level of penetration of renewable
resources in an area, such as CSP, it must be able to interact with
other areas to maintain the required real-time load-generation balance.
That interaction requires sufficient transmission capacity between the
areas, and this consideration alone will require expanding the system.
If giving FERC exclusive jurisdiction to site new transmission for
renewable envy projects can withstand the likely challenge by the
states, then this should be very helpful. For CSP, perhaps FERC's
jurisdiction could be limited to siting new transmission from the solar
zones that are under study by the BLM, the Western Governors'
Association and the California Renewable Energy Transmission Initiative
and to projects above a minimum size, say 250 MW.
ITC
Question 5. One of the most important issues facing the solar
industry today is that the tax credits we passed in a bipartisan manner
are set to expire. We must enact a long-term ITC extension as soon as
possible. However, for the first time in the renewable tax credit
history, the House Majority is insisting that the tax credits be
``offset'' by tax increases on other industries.
Many of you have submitted testimony highlighting the tremendous
economic boost the ITC provides the solar industry. According to Dr.
Marker from SHOTT, solar capacity additions in 2007 contributed $2
billion to the U.S. economy, creating 6,000 new jobs. And, it's
forecasted that if the ITC is extended, 62,000 manufacturing and
distribution jobs will be created.
Do you agree that these tax credits ``pay for themselves'' and
therefore don't need to be paid for by raising taxes on other
industries? Is the renewable industry concerned that this new ``pay
for'' requirement can set a troubling precedent in that offsets will be
required each time the existing tax credits expire?
Answer. I am well aware of the opposing views on if and how the ITC
extension should be paid for however I am not in a position to comment
on that. Solar energy has become another engine of the US economy and
the extension of the ITC will allow solar to continue creating more
jobs, contributing to economic growth and helping to reduce carbon
emissions. Failure to find a way to extend the ITC now will result in
the loss of over 25,000 jobs and the loss of the economic benefits of
about $18 billion in investment in the 4, 800 MW of CSP plants now
under contract but not financeable without the eight year extension of
the ITC. And this at a time when America is trying to stop the loss of
jobs and address serious energy concerns. I hope that a way can be
found to pass the renewable energy tax credit extensions. To stop solar
in its tracks seems like the wrong outcome for America.
SOLAR RESOURCE POTENTIAL
Question 6. We currently have just over 400 MW of CSP installed
capacity in this country, at a rate of about 16 cents per kilowatt-
hour. A recent study suggests that solar energy could grow to 10% of
the nation's power by 2025. Do you agree with that assessment? If so,
what percentage will CSP contribute as opposed to Photovoltaic? Also,
how long will it take to get solar power costs on parity with
conventional power sources?
Answer. A study done by NREL estimates that CSP could provide
nearly 120, 000 MW of capacity by 2050. Although this represents only
about 6.8% of the nation's power, it would be a significant percentage
of the power needed by the Southwest. The NREL analysis assumed all CSP
power stayed within one state from where it was generated. This
assumption exemplifies the fact that the growth of CSP power is limited
by transmission. If DC transmission were available to move power from
the SW to the East, CSP's potential would be greatly expanded. From a
national perspective, solar power could be particularly beneficial to
the eastern half of the country because the sun shines in the West
throughout the East's evening high demand period. Because PV can
produce electricity throughout the country, its potential could be
higher than that of CSP. Regarding the time it will take for solar
power to achieve parity with conventional sources, I believe that if
the ITC is extended for eight years, CSP will be cost competitive with
convention power by the end of those eight years. However, both CSP and
conventional power will increase due to increased commodity prices.
______
Responses of Charles E. Andraka to Questions From Senator Domenici
Question 1. According to Sandia, it is possible to lower the CSP
costs from today's 16 cents per kwH, to 12 cents in the near-term and
even 6 cents in the long-term. How long do you estimate it will be
before CSP drops to 12 cents? 6 cents?
Answer. The cost reductions for CSP technology, as for any emerging
power system, are largely dependent on deployment. The costs to which
you refer are from a 2003 report done by the DOE for the National
Research Council,\1\ commonly referred to as the ``Sergeant and Lundy
Report.'' While the costs of all technologies, especially fossil-
fuelbased, have increased in the interim, this study reports that the
cost reductions for trough and tower systems will result about equally
from three sources: deployment, learning-curve cost reductions related
to financing; and R&D of new components. The study indicates that cost
reductions as low as 10 cents could be achieved with as little as 3 to
5 GW of deployment of CSP systems. (Note: there are currently 4 GW of
CSP projects planned for deployment in the southwest.) The lower end of
the scale, in the 6 cent range, requires aggressive technical
advancement as well as deployment, as stated in the Sergeant and Lundy
report:
---------------------------------------------------------------------------
\1\ Assessment of Parabolic Trough and Power Tower Solar Technology
Cost and Performance Forecasts, prepared for the Department of Energy
and National Renewable Energy Laboratory, SL-5641, May 2003.
The specific values will depend on total capacity of various
technologies deployed and the extent of R&D program success. In
the technically aggressive cases for troughs / towers, the S&L
analysis found that cost reductions were due to volume
production (26%/28%), plant scale-up (20%/48%), and
---------------------------------------------------------------------------
technological advance (54%/24%).
The net of these aggressive reductions reaches the 6 cent range.
The original Sergeant & Lundy study is currently being updated and new
number should be available late in the Fall. It should also be noted
that the 6 cent range was seen in 2003 as the level needed to be
competitive with conventional fossil technologies. The current market
conditions will likely raise this competition level closer to 10 cents.
While it is not possible to say exactly when the cost of CSP
systems will drop below 12 cents per kWhr, it was reported that a
recent large US trough project was bid at 14 cents per kWhr.
Question 2. To date, there are no Power Tower CSP projects in this
country, although an 11 MW project just came on-line in Spain. What are
the advantages/disadvantages to this technology? Why aren't we seeing
any Power Tower projects developed in the U.S.?
Answer. An 11 MW power tower project was built in Spain because of
the favorable CSP incentive structure that will pay 47 UScents/kWhr for
power from CSP; because a large company (Abengoa Solar) recognized a
worldwide business development opportunity; and because of an
additional government subsidy for the project.
As noted in the Sargent & Lundy report, the power tower has a
longer-term cost advantage relative to solar trough systems. This is
largely due to the fact that a power tower is a higher efficiency
system and can more readily integrate thermal storage, thereby
improving the capacity factor (yearly hours of operation) and potential
value to the utilities.
So far we have not seen the deployment of power towers in the U.S.
because of the perceived technical and financial risks. Due to the
large initial capital investment needed for these projects, it has been
difficult to obtain power purchase agreements and financing for higher
risk projects. However, there is one power purchase agreement for a
power tower in California between Pacific Gas & Electric and
BrightSource energy. At least two other companies, eSolar and Solar
Reserve, are actively developing projects in the southwest U.S.
The fact remains that we must find a way to enable the deployment
of higher-risk, technologies at the utility-scale of solar power.
Question 3. I understand that Sandia is studying the new 64 MW CSP
project in Nevada. What are you learning from that project? Why didn't
that project include a thermal storage component?
Answer. The Nevada Solar 1 project was funded by private industry.
Sandia is familiar with the technology and has worked with the
developer, Solargenix, in the past but we do not have access to the
data on the operation of the plant.
This system does not include thermal storage for two reasons: the
utility, Nevada Power, did not value thermal storage to increase the
capacity factor of the plant and they wanted the lowest cost solar
option.
It should be noted that, even though two trough plants with storage
are under construction in Spain, thermal energy storage for trough
systems is not well established and some utilities and financial
institutions consider it to be a higher risk technology. The announced
280 MW trough plant for the Phoenix area also includes thermal storage.
While extending troughs to include storage is a current area of intense
DOE and industry research, the potential for storage in towers appears
to be much greater. This is because of the higher temperatures inherent
in tower systems, which leads to less storage volume for a given level
of storage. In addition, current storage proposals for troughs have a
separate storage medium, requiring an expensive heat exchanger, whereas
towers store the energy in the operating fluid (salt). We expect that
current DOE development will support an increase in the number of
plants, both towers and troughs, that incorporate thermal storage.
Question 4. Currently, a CSP project requires approximately 5 acres
of land per megawatt. Is there room for improvement?
Answer. There is a small difference in the area required for a
trough, a tower, and dish/Stirling systems. The size of the solar field
for all three of the technologies is driven by shading issues in the
morning and evening, as well as mid-day in the winter when the sun is
lower in the sky. Any reduction in the area required for the
concentrators will be incremental because it depends on the fundamental
optics of concentrating sunlight. The plant concentrator area could be
reduced by tradeoffs that the developer would make between energy
production at certain times of year and plant foot print.
TRANSMISSION
Question 5. In the 2005 Energy Policy Act, Congress sought to
address the critical issue of transmission siting through the National
Interest Electric Transmission Corridor process. Even though these
provisions haven't been fully implemented, and no line has been sited
pursuant to EPAct, the NIETC process has proven controversial. Still,
everyone here today has highlighted the critical need to bring more
transmission on line to transport these renewable resources to load.
Just this past weekend, the Albuquerque Journal ran an Op-Ed
criticizing environmental groups--who want the ``green'' power but not
the infrastructure that goes with it--for opposing needed transmission
lines.
What more should Congress do in this important area? Some have
called for Congress to provide FERC with exclusive jurisdiction to site
new transmission for a renewable project. Please comment.
Answer. There are two approaches to address the nations growing
electricity demand, through centralized generation and through
distributed generation. Centralized generation includes coal, nuclear,
wind farms, concentrated solar power plants, photovoltaic arrays,
geothermal energy and other generation sources that produce electricity
on the megawatt through gigawatt scale. Most of this centralized
generation connects to the grid at the transmission or subtransmission
voltage level. Much of the available renewable resources exist in
locations where transmission is not available to transport the energy
to the loads. In this case, new transmission lines are needed to make
large quantities of renewable power available where it is greatly
needed. The 2006 National Electric Transmission Congestion Study
identified critical congestion areas based on current and projected
growth. There are many barriers to get the needed transmission sited
and installed including regulatory, cost recovery, and technical
issues. Giving FERC exclusive jurisdiction in siting new transmission
for renewables does not solve the problem about who pays for new
transmission. A technical challenge that has not been addressed with
the high penetration of renewables is grid stability. Utilities are now
running into problems with maintaining frequency stability with large
amounts of intermittent generation such as wind and solar. This is
primarily due to the fact that currently deployed versions of these
renewable resources are not dispatchable, in other words we only have
wind energy when the wind blows and photovoltaic energy when the sun
shines. This is unlike fossil, nuclear, and geothermal generation that
we can dispatch as needed because we have control of the fuel source at
the generation plant as needed. Utilities have compensated by running
dispatchable fossil generators as ``spinning reserve'' to compensate
for renewable intermittency, which is not always cost effective. There
is concern that increasing the penetration of renewables on the
electric grid will increase stability problems. A key technology that
will enable the dispatchability of renewables and help alleviate the
stability problem is energy storage. Significant additional research is
needed in this area. Concentrating solar power is one renewable
technology that can incorporate storage technology through molten salt.
The second approach to meeting the nations growing electricity
demand is through the use of more distributed generation. This includes
rooftop photovoltaic panels, photovoltaic arrays at distribution
voltages, distributed wind, fuel cells, and other small generation
resources that can be placed at or very near the load. This approach is
attractive for remote load sites and where new transmission is not a
viable option. There are numerous challenges that have been identified
by increasing the penetration of renewables at the distribution level
through the DOE Renewable Systems Interconnection (RSI) initiative .
This set of studies completed in December 2007 outline the challenges
for distributed photovoltaics in the categories of 1)Distributed PV
System Technology Development, 2)Advanced Distribution Systems,
3)System Level Test and Demonstration, 4)Distributed Renewable Energy
System Analysis, 4) Solar Resource Assessment, 6)Codes, Standards, and
Regulatory Implementation. However, these studies only identify some of
the problems and funding is not in place to address the identified
challenges. While these studies focus on distributed photovoltaics, the
concepts are applicable to most renewables.
In summary, transmission siting is just one element of the
renewable interconnection challenge. Further research in renewable
systems interconnection is needed to address the technology needs,
codes and standards, business models, and regulatory issues to assure
that we maintain a secure and reliable electric grid as we increase the
penetration of renewables in the US.
ITC
Question 6. One of the most important issues facing the solar
industry today is that the tax credits we passed in a bipartisan manner
are set to expire. We must enact a long-term ITC extension as soon as
possible. However, for the first time in the renewable tax credit
history, the House Majority is insisting that the tax credits be
``offset'' by tax increases on other industries.
Many of you have submitted testimony highlighting the tremendous
economic boost the ITC provides the solar industry. According to Dr.
Marker from SHOTT, solar capacity additions in 2007 contributed $2
billion to the U.S. economy, creating 6,000 new jobs. And, it's
forecasted that if the ITC is extended, 62,000 manufacturing and
distribution jobs will be created.
Do you agree that these tax credits ``pay for themselves'' and
therefore don't need to be paid for by raising taxes on other
industries? Is the renewable industry concerned that this new ``pay
for'' requirement can set a troubling precedent in that offsets will be
required each time the existing tax credits expire.
Answer. We do not have the data to document the net ``value'' of
the Investment Tax Credit. However, analysis for states in the
southwest has shown that the development of CSP projects has a positive
value to state and local economies over the lifetimes of the projects.
Specific examples have been sited in several reports.\2\ \3\ \4\
---------------------------------------------------------------------------
\2\ The Economic Impact of Concentrating Solar Power in New Mexico,
The University of New Mexico, Bureau of Business and Economic Research,
December 2004.
\3\ The Potential Economic Impact of Constructing and Operating
Solar Power Generation Facilities in Nevada, Final Report, R. Keith
Schwer and Mary Riddel, Center for Business and Economic Research,
University of Nevada, Las Vegas, July 2003
\4\ Economic, Energy, and Environmental Benefits of Concentrating
Solar Power in California, Deliverable 3 Final Report, Black and
Veatch, Prepared for National Renewable Energy Laboratory Under
Subcontract AEK-5-55036, September 2005
---------------------------------------------------------------------------
SOLAR RESOURCE POTENTIAL
Question 7. We currently have just over 400 MW of CSP installed
capacity in this country, at a rate of about 16 cents per kilowatt-
hour. A recent study suggests that solar energy could grow to 10% of
the nation's power by 2025. Do you agree with that assessment? If so,
what percentage will CSP contribute as opposed to Photovoltaic? Also,
how long will it take to get solar power costs on parity with
conventional power sources?
Answer. With the sustained incentive of the 30% ITC through 2017,
the study results presented at the hearing predicts a deployment of 22
GW by 2025.\5\ If the ITC were extended through 2025, the total
deployment could be 40 GW as predicted by the same methodology
presented in this reference. To reach 10% of the current U. S. grid
capacity or about 100 GW by 2025 would require more aggressive
incentives, significant streamlining of approval processes, and
aggressive expansion of transmission capabilities.
---------------------------------------------------------------------------
\5\ Department of Energy Solar Energy Technologies Program, Multi
Year Program Plan, 2008-2012, April 2008. Plan available at: http://
www1.eere.energy.gov/solar/pdfs/solar_program_mypp_2008-2012.pdf.
---------------------------------------------------------------------------
CSP and photovoltaics are primarily focused on different market
sectors. CSP is focused on the wholesale, utility-scale power market
and photovoltaics are currently being applied to the ``higher value''
distributed, retail power market. The very large CSP installations are
centrally sited, permitted, and maintained, but compete at utility
generation rates. The bulk of current PV installations are distributed,
either at the rooftop level or in relatively small power plants, are
sited, permitted, and maintained by the owners, and compete financially
on the customer side of the meter (retail pricing). The deployment
scenarios and incentives are very different to reflect the needs and
unique characteristics of these two markets. U. S. deployment of
photovoltaics is predicted to be 20 to 25 GW by 2025 in the
photovoltaics roadmap.\6\ If the cost of photovoltaics falls as some
think it may, it is possible that in the future PV may also compete in
the utility-scale markets, as it currently does in Spain.
---------------------------------------------------------------------------
\6\ Solar Electric Power, The U.S. Photovoltaic Industry Roadmap,
May 2001, available at http://photovoltaics.sandia.gov/docs/PDF/
PV_Road_Map.pdf
---------------------------------------------------------------------------
Even with the increase in the cost of commodities, CSP costs are
projected to continue to decrease. The current cost of conventional
pulverized coal power continues to increase with anecdotal costs
indicated to be in the 5 to 7 cents/kWhr range. More importantly,
uncertainty over future carbon regulation is resulting in the
cancellation of orders for new pulverized coal plants. Carbon capture
is projected to increase the cost of coal by an additional 5.4 cents/
kwhr,\7\ perhaps more if gasification technology is utilized. This
means that the gap between the cost of generating a kWhr of electricity
using pulverized coal and CSP and other sources of renewable
electricity is growing smaller. As discussed during the testimony, once
a solar plant is installed, the cost of electricity generated is
relatively stable over the life of the plant, while conventional
technology energy costs are highly dependent upon the cost of fuel.
---------------------------------------------------------------------------
\7\ Reducing U. S. Greenhouse Gas Emissions: How Much at What
Cost?, U. S. Greenhouse Gas Mapping Initiative, Executive Report,
December 2007. (aka, the McKinsey Report)
---------------------------------------------------------------------------
______
Responses of Alex Marker to Questions From Senator Domenici
Question 1. You testified that eventually, solar storage could
produce electricity 24/7 without the need for natural gas back-up.
Currently, our solar storage capabilities are about 6 hours. When do
you envision a 24/7 CSP plant?
Answer. It is technically possible to continuously operate a CSP
trough plant based on technology available today. However it may not be
economically competitive with baseload power generation. Many utility
companies have a need for cost competitive peak power, which is what's
driving demand for CSP technology.
CSP power plants, with thermal storage on the order of six hours,
will provide utilities peaking capability that extends into the evening
hours. With proper Federal incentives and policy, CSP can be
competitive with other technologies for providing peak power, with the
ultimate goal of continuous cost-competitive power generation. A long-
term extension of the ITC will spur this research and will drive
innovation.
Question 2. When your manufacturing plant comes on-line next
Spring, how many megawatts of solar collectors will you be able to
produce on an annual basis?
Answer. SCHOTT Solar anticipates having several production lines to
manufacture receivers for parabolic trough concentrated solar power
(CSP) plants. Each one of these lines will produce enough receivers
capable of producing between 100MW and 200MW of annual power. Initial
plans call for the facility to have two receiver production lines.
The broad range in output from each line is variable due to where
the receivers are installed, and the overall size and efficiency of the
projects they will be integrated into.
The facility is being designed with future expansion in mind, to
accommodate the anticipated rapid growth of the utility-scale CSP
market. SCHOTT Solar's further growth in Albuquerque is contingent upon
worldwide market demand.
TRANSMISSION
Question 3. In the 2005 Energy Policy Act, Congress sought to
address the critical issue of transmission siting through the National
Interest Electric Transmission Corridor process. Even though these
provisions haven't been fully implemented, and no line has been sited
pursuant to EPAct, the NIETC process has proven controversial. Still,
everyone here today has highlighted the critical need to bring more
transmission on line to transport these renewable resources to load.
Just this past weekend, the Albuquerque Journal ran an Op-Ed
criticizing environmental groups--who want the ``green'' power but not
the infrastructure that goes with it--for opposing needed transmission
lines.
What more should Congress do in this important area? Some have
called for Congress to provide FERC with exclusive jurisdiction to site
new transmission for a renewable project. Please comment.
Answer. An expanded transmission grid is absolutely essential for
moving renewable energy to customers. The current transmission grid was
built decades ago to connect traditional fossil fuel generation with
the load centers. Any carbon-free energy paradigm will require new
transmission lines to once again connect customers with their desired
power source--this time, solar, wind and other clean energy resources.
The lack of investment in our transmission grid will limit how much
renewable energy can be delivered, and therefore developed. As you
heard at the committee's June 17 hearing on transmission challenges,
there is a clear need to deal with the problems around building new
transmission lines.
One solution might be to give FERC exclusive jurisdiction to site
new transmission lines, similar to its authority to site natural gas
pipelines. Another solution may be multi-state regional cooperation,
where public utility commissions, utilities and project developers
could pool resources and expertise to propose new transmission lines to
the benefit of all involved.
There are currently several cooperative efforts going on in the
West--the Western Governors' Association Western Renewable Energy Zone
initiative and California's Renewable Energy Transmission Initiative--
which seek to both identify areas rich in renewable resources and the
transmission necessary to move that power to end-use customers.
ITC
Question 4. One of the most important issues facing the solar
industry today is that the tax credits we passed in a bipartisan manner
are set to expire. We must enact a long-term ITC extension as soon as
possible. However, for the first time in the renewable tax credit
history, the House Majority is insisting that the tax credits be
``offset'' by tax increases on other industries.
Many of you have submitted testimony highlighting the tremendous
economic boost the ITC provides the solar industry. According to Dr.
Marker from SHOTT, solar capacity additions in 2007 contributed $2
billion to the U.S. economy, creating 6,000 new jobs. And, it's
forecasted that if the ITC is extended, 62,000 manufacturing and
distribution jobs will be created.
Do you agree that these tax credits ``pay for themselves'' and
therefore don't need to be paid for by raising taxes on other
industries? Is the renewable industry concerned that this new ``pay
for'' requirement can set a troubling precedent in that offsets will be
required each time the existing tax credits expire?
Answer. SCHOTT Solar (``the company'') strongly believes that a
long-term (8-year) extension of the ITC is an essential component in
developing a long-term, sustainable market for solar energy in the
United States. The company has not engaged in analyzing the financial
impact of an extension of an ITC beyond the effects it will have on
SCHOTT Solar's immediate business.
A study recently prepared by GE Energy Financial Services (June
2008) concluded that the ITC would `` pay for itself'' through
continued investment and employment numbers.
It should be considered, and cautioned, that although the ITC is
one of the most important factors in developing the solar market in the
United States, it is not the only factor. Market development may not
grow as forecasted.
Regarding setting a precedent for renewing the ITC--the market will
rapidly develop, and consequently change, between now and when the ITC
(if extended for the long-term) will be set to expire. SCHOTT Solar
trusts in the Federal government to make an informed, and appropriate
decision relating to extensions of the ITC, based on market analysis
available at that time.
SOLAR RESOURCE POTENTIAL
Question 5. We currently have just over 400 MW of CSP installed
capacity in this country, at a rate of about 16 cents per kilowatt-
hour. A recent study suggests that solar energy could grow to 10% of
the nation's power by 2025. Do you agree with that assessment? If so,
what percentage will CSP contribute as opposed to Photovoltaic? Also,
how long will it take to get solar power costs on parity with
conventional power sources?
Answer. The potential of solar energy is almost limitless,
especially in the Southwest of the United States, where, if just 2.5%
of the usable land were converted into CSP power plants, it would
satisfy the entire nation's energy needs (at 2006 usage).
Before directly answering the question, it should be noted that the
16 cents per kilowatt-hour is an aggregated figured based upon the
``first generation'' of parabolic trough CSP plants (SEGS). Costs will
continue to decrease through technological developments, economies of
scale in constructing the sites, and improvements in transmission. At
Acciona Energy's ``Nevada Solar One '' facility in Boulder City, NV, it
is estimated that the cost to generate electricity from the facility is
fixed at 3 cents per kilowatt hour (not inclusive of amortizing the
cost of constructing the facility).
ENERGY MIX
Whether or not the nation will be able to consume 10% of its energy
from solar powered sources, is contingent upon the speed and ease in
which large-scale solar facilities will be allowed to set-up, operate,
and provide power to the grid. A long-term extension of the ITC is a
key component in allowing this rapid market development. A Federal
Renewable Portfolio Standard (RPS) would motivate utilities to buy and
consume renewable energy. Streamlining and standardizing grid
connection and transmission will also create a powerful climate for the
rapid growth of CSP.
PERCENTAGE OF CSP VS. PV
CSP and PV are complementary technologies (much like wind and solar
are complementary). PV is mainly used for distributive power
generation, where the power produced is consumed at that location. With
only a handful of notable exceptions, PV installations generally do not
exceed 1MW in capacity.
CSP, however, is a utility-scale, central station technology where
installations generally achieve production exceeding 50MW capacity.
Although it is possible to construct and operate smaller scale CSP
power plants, through economies of scale, they are not cost-
competitive.
Due to the sheer size of CSP power plants, as well as the speed in
which they're able to be constructed (for reference, Accciona Energy's
Nevada Solar One was producing power a year after ground was first
broken), and no foreseen raw material supply constraints, under the
right climate--tremendous CSP growth is possible. As a point of
reference, there are currently 4, 000 MW of CSP projects currently in
the planning / permitting stage. With a clear signal of support from
the Federal government in this clean, fixed cost, domestically produced
energy source--many of these projects will shift from planning to
construction and many more will enter the planning stage.
It is difficult to assign an exact figure for PV growth over the
eight year term of an ITC extension, as the nature of projects are
generally much smaller. One can look at PV manufacturing capacity
(which is rapidly developing) but it is unknown how much PV will be
imported from overseas, and conversely, how much will be exported from
the U.S. It is for this reason, that I apologize I am unable to provide
the committee with an exact answer to this question.
CLOSING REMARK
Distinguished committee members, on behalf of the solar industry,
and SCHOTT Solar, we appreciate your continued efforts to focus on the
promise and possibility of solar energy. The benefits of the technology
are numerous, not only from an environmental standpoint, but also as an
economic engine. Solar energy has tremendous support across the
country. 94% of Americans, in a recent poll, stated it is important for
the U.S. to develop and use solar energy, and approximately 75% of
Americans favor a long-term extension of the ITC. This is an issue we
all agree on.
The United States and New Mexico stand to reap a tremendous
economic benefit from a long-term extension of the ITC. There is no
reason why New Mexico can not take a global lead in renewable energy.
In twenty years I am confident that, when flying across the desert
Southwest, a glimmer of light will catch my eye from a parabolic
mirror, focusing the sun's energy on a receiver, which will be
providing clean, reliable, fixed cost energy across the U.S. And I will
think back to this time, and the hard work we are all undertaking.
It is through your leadership and guidance that the United States
will return to its position as a clean energy leader.
______
Responses of Fong Wang to Questions From Senator Domenici
Question 1. You testified that last year, approximately 12% of
PG&E's electric delivery mix was comprised of renewable resources. How
much of this is comprised by solar? How much wind have you added to
meet California's RPS requirement? Are you on target to meet the
State's goal of 33% of renewable energy by 2022? Isn't there an
initiative to raise this goal even further, to 50%?
Answer. In 2007, the breakout of PG&E's 12 percent California-
eligible\1\ renewable electricity delivery mix was as follows: solar,
less than 1 percent; wind, 15 percent; California-eligible small
hydroelectric, 21 percent; geothermal, 30 percent, and biomass and
waste, 34 percent. (Note: the distributed solar installed by PG&E's
customers does not count for PG&E's RPS requirement.)
---------------------------------------------------------------------------
\1\ As defined in California Senate Bill 1078, which created
California's renewable portfolio standard, an eligible renewable
resource includes geothermal facilities, hydroelectric facilities with
a capacity rating of 30 MW or less, biomass, selected municipal solid
waste facilities, solar facilities and wind facilities.
---------------------------------------------------------------------------
Since the California RPS was created in 2002, PG&E has signed 39
contracts for 2,612 MW (up to 3,195 MW if all options are exercised).
The amount of wind and other resources added are as follows:
A 33 percent renewable energy standard has been proposed by the
California Air Resources Board (CARB) as a key pillar to driving down
greenhouse gas emissions in California. PG&E is reviewing that option
and looking forward to working with the CARE and other interested
parties going forward. We are committed to being a constructive part of
California's drive to increase its use of renewable resources. We do
believe, however, that as these requirements are debated and
established, policy makers should carefully consider and must ensure
that:
1. Appropriate tax and financial incentives are available,
2. Sufficient transmission has been built or approved to
deliver newly developed renewable energy to customers,
3. Consensus is reached on the maximum price customers should
be expected to pay for renewable energy, and
4. Reliability isn't jeopardized by over-reliance on
intermittent energy resources.
We are confident these issues will be addressed, as they are
necessary to ensure the viability and success of RPS requirements.
We do not support the current ballot proposal in California to
raise the RPS level to 50%, and have joined a coalition with
environmental groups, organized labor, and renewable energy producers
to oppose this well-intended, but poorly drafted ballot initiative. We
would recommend that you contact the coalition Californians Against
Another Costly Energy Scheme (www.noprop7.com) for further information
on this matter as it has been authorized to speak on behalf of all of
its members.
Question 2. I understand that PG&E is working through California's
Renewable Energy Transmission Initiative. Please elaborate. Are you
working on any interstate transmission policies or are you
concentrating wholly intrastate?
Answer. PG&E is an active participant in California's Renewable
Energy Transmission Initiative, or ``RETI.'' In addition to California,
the footprint of the RETI analysis includes British Columbia,
Washington, Oregon, Nevada, Arizona and Baja Mexico. This process will
identify renewable resource areas that are well-suited for major new
transmission investments, as well as specific transmission projects to
access the identified areas. RETI is being developed in phases with the
first phase focused on identifying the most promising renewable
resource areas and the second phase focused on identifying conceptual
transmission plans necessary to gain access to these areas. The
initiative is modeled on the approach used in the Tehachapi area in
California and also on the work done by ERGOT in Texas. The current
scope of the first phase to identify renewable resource areas includes
areas outside California. We recommend that federal legislation avoid
creating conflicts with RETI and any other similar state-led
initiatives in this area. Federal policies related to these efforts
include interconnection policies that govern the process for
interconnection studies and cost allocation for constructing any
necessary transmission upgrades to support renewable development.
Federal land use policies will also be a key issue in the ultimate
development of the renewable resource areas and the associated
transmission necessary to access those resources. Some of the lead
federal agencies are participating in the RETI process. The extent to
which the land use policies of these agencies align with the goals of
RETI has not yet been specifically determined.
PG&E is also supporting the Western Electricity Coordinating
Council Transmission Expansion Planning and Policy Committee workgroups
that are identifying interstate transmission options for supporting
various renewable energy development scenarios in the West.
Question 3. How are you dealing with the transmission necessary to
transport your solar energy?
Answer. PG&E and other California-based investor owned utilities
have executed agreements to purchase power from a number of solar
energy projects, however, the identification of the transmission method
of service for these projects have been delayed due to the large number
of generation projects in the CAISO interconnection queue. PG&E is
actively participating in an effort by the CAISO to address its
generation interconnection process with the aim of providing a clear
path to interconnecting renewable resources in California. PG&E and the
CAISO have also identified a major transmission upgrade opportunity to
address reliability needs, improve access to energy storage facilities
and improve access to renewable resources in southern California. The
project does not specifically require interconnection of solar energy
resources but is part of transmission expansion plans to access and
integrate renewable resources in California.
Question 4. In the 2005 Energy Policy Act, Congress sought to
address the critical issue of transmission siting through the National
Interest Electric Transmission Corridor process. Even though these
provisions haven't been fully implemented, and no line has been sited
pursuant to EPAct, the NIETC process has proven controversial. Still,
everyone here today has highlighted the critical need to bring more
transmission on line to transport these renewable resources to load.
Just this past weekend, the Albuquerque Journal ran an Op-Ed
criticizing environmental groups--who want the ``green'' power but not
the infrastructure that goes with it--for opposing needed transmission
lines.
What more should Congress do in this important area? Some have
called for Congress to provide FERC with exclusive jurisdiction to site
new transmission for a renewable project. Please comment.
Answer. In California, PG&E has strongly supported efforts at the
California Public Utility Commission (CPUC) and the California
Independent System Operator (CAISO) intended to provide California
utilities with the tools they need to proactively plan and develop
transmission facilities for renewable sources of electricity. These
efforts include the development of a category of needed transmission
projects under the CAISO tariff for renewable trunk lines, as well as
``backstop'' cost recovery proposals at the CPUC intended to encourage
utilities to exercise their right under FERC interconnection policy to
provide up-front funding for RPS-related network upgrades where doing
so makes sense for customers and the state's RPS goals.
Planning for and expansion of transmission is appropriately
performed by transmission owners working in conjunction with
appropriate state or regional transmission system operators. The
application of FERC backstop siting authority should be consistent with
state and regional planning efforts to develop and maintain coordinated
transmission planning processes.
The states are generally best suited to address local and state
issues concerning the siting and design and environmental review of
state projects. However, PG&E sees FERC's backstop siting authority as
a potential useful mechanism for ensuring the efficient processing of
transmission corridors when states have not acted.
Specifically, in cases where local interests may prevent
transmission facilities from being sited and the state has withheld
approval, FERC involvement can be useful in moving the process along.
For example, FERC's backstop siting authority may be most appropriate
for interstate corridors with significant congestion, and where
proposed interstate projects require approvals by multiple states with
potentially conflicting objectives.
Question 5. One of the most important issues facing the solar
industry today is that the tax credits we passed in a bipartisan manner
are set to expire. We must enact a long-term ITC extension as soon as
possible. However, for the first time in the renewable tax credit
history, the House Majority is insisting that the tax credits be
``offset'' by tax increases on other industries.
Many of you have submitted testimony highlighting the tremendous
economic boost the ITC provides the solar industry. According to Dr.
Marker from SHOTT, solar capacity additions in 2007 contributed $2
billion to the U.S. economy, creating 6,000 new jobs. And, it's
forecasted that if the ITC is extended, 62,000 manufacturing and
distribution jobs will be created.
Do you agree that these tax credits ``pay for themselves'' and
therefore don't need to be paid for by raising taxes on other
industries? Is the renewable industry concerned that this new ``pay
for'' requirement can set a troubling precedent in that offsets will be
required each time the existing tax credits expire?
Answer. PG&E supports establishing long-term tax credits, and the
market certainty that provides, such as the 8-year extension proposed
in recent federal legislation. This will enable the solar industry to
obtain the continued financial investment necessary to see these multi-
year projects through from design, to construction, and to operation.
This long-term tax credit approach will also enable the industry to
establish a sufficient manufacturing base to achieve the economies of
scale necessary to reduce costs and ultimately minimize the need for
such subsidies. Conversely, the potential of this industry will be
delayed or not be realized in an environment characterized by year-to-
year extensions, and the market uncertainty created by such annual
legislative processes.
Question 6. We currently have just over 400 MW of CSP installed
capacity in this country, at a rate of about 16 cents per kilowatt-
hour. A recent study suggests that solar energy could grow to 10% of
the nation's power by 2025. Do you agree with that assessment? If so,
what percentage will CSP contribute as opposed to Photovoltaic? Also,
how long will it take to get solar power costs on parity with
conventional power sources?
Answer. The study cited, ``Utility Solar Assessment (USA) Study,
Reaching Ten Percent Solar by 2025'', projects that solar PV would
provide 8 percent and CSP would provide 2 percent of total U.S.
electricity. It would require an installation of 255 GW of solar by
2025 at a Compound Annual Growth Rate of 33 percent for PV and 28% for
CSP.
The amounts projected are achievable, but to reach those values by
2025 would require 100 percent of the many assumptions to happen
perfectly and on schedule. Experience tells us that rarely does that
happen. We would expect the actual process to take somewhat longer.
Achieving grid parity between solar and local utility rates will be
affected by several factors, including, among others, utility rate
design, solar insolation in a given area, increases in fossil fuel
costs, and carbon costs. It is expected that grid parity will be
reached prior to the 2025 reference date, possibly as early as 2015 in
some areas.