When it comes to fighting global warming, San Diego Gas & Electric and its parent company, Sempra Energy, are accomplishing the neat trick of being both first and last. Sempra, for its part, has built a new solar energy plant in Nevada that uses cutting-edge technology to produce electricity from the sun. SDG&E, meanwhile, remains the state’s worst big utility at obtaining electricity from clean, renewable sources.
But let’s start with the positive.
Sempra has generated considerable attention in recent weeks for the new solar-electric generating plant it completed in a matter of months just outside Las Vegas. Called El Dorado Energy Solar, the facility uses thin-film photovoltaic panels, a technology that reduces the amount of costly materials required to make solar panels with only modest concessions in efficiency.
According to Mark Bachman, an analyst with Pacific Crest Securities, El Dorado is the first solar plant in the nation to generate electricity at prices comparable to those from fossil-fuel power plants. This has long been the target of solar advocates.
“It is very fair to characterize this as a breakthrough,” said Bachman.
Noting that the Sempra plant is located in an area ideal for solar power, Bachman estimates the facility will generate power at 7.5 cents per kilowatt-hour, compared to a benchmark of 9 cents per kilowatt-hour for fossil-fuel-generated power.
And Sempra was pleased to confirm its solar advantage.
“Our contract is the least expensive solar power ever delivered in the world [at commercial volume],” said Michael Allman, chief executive of Sempra Generation.
Cheap, clean electricity from facilities like El Dorado solar hold the potential for reducing greenhouse gas emissions and in the future retiring some fossil-fuel-driven plants.
This is encouraging news for the planet. But it turns out to be of no use to San Diego Gas & Electric, a Sempra utility that is struggling to meet a state mandate for renewable electricity.
California law re-quires all major utilities to generate 20 percent of their electricity from renewable sources by the close of next year. SDG&E generates about 6 percent of its electricity from renewables. During 2008, for comparison, Southern California Edison generated 16 percent of its electricity from renewable sources. Pacific Gas & Electric, a Bay Area utility, last year expected to generate 13 percent of its electricity from renewables.
So SDG&E ranks last by far among major utilities in developing renewable resources. Even worse for local renewable efforts — and for local air quality, which suffers when fossil fuels are burned to generate power — SDG&E says it’s “unlikely” to meet the deadline at the close of 2010.
Given that predicament, it would be reasonable to expect that SDG&E would buy electricity from Sempra’s new solar facility.
That has not happened.
Although a Sempra spokesman insists that electricity from El Dorado was offered to SDG&E, it will instead be sold to PG&E.
A similar transaction was consummated last July, when Sempra announced it would sell the electricity from a planned 150-megawatt wind farm in northern Baja to Southern California Edison. (A single megawatt will power about 650 typical homes.) A Sempra spokes-man said the sale of electricity from the wind farm was “already in final negotiations” when Sempra bought the project.
When queried about the obligation of a large parent company like Sempra to assist its SDG&E subsidiary in meeting California’s renewable energy requirements, Sempra spokespersons emphasize that transactions between affiliate companies are heavily regulated by the California Public Utilities Commission. They note that a parent company’s legal obligation is to ensure that its utility subsidiaries have adequate capital and say Sempra has invested billions in its utility businesses in recent years and has plans for billions more through 2012.
It is true that consumer advocates and regulators have long insisted on strict oversight of deals between units of the same company, known as affiliate transactions. These regulations are designed to protect against in-house transactions that may come at the expense of utility customers.
But affiliate transactions are done.
In 2006, Sempra sold a natural gas–fueled power plant in Escondido to SDG&E. And Sempra plans to sell SDG&E a gas-fired power plant located in Nevada, a deal that is part of the settlement Sempra reached with the California attorney general to resolve allegations that it manipulated the natural gas market in the state. Ironically, that plant sits on the same site as the El Dorado solar facility. But while SDG&E will get the electricity from the gas-fired plant, the electricity cleanly generated next door will go to PG&E.
Spokespersons for SDG&E are quick to point out that other state utilities are reporting difficulty in satisfying the state’s 20 percent mandate. (There is one large utility that will reach the goal — the publicly owned Sacramento Municipal Utility District.)
SDG&E says it has signed contracts that could allow it to reach 15 percent renewable by the end of 2010, the deadline for the state mandate. The utility says contracts should allow it to reach 21 percent renewable by 2011.
But outsiders say that SDG&E is counting for nearly half (44 percent) of its renewable electricity in 2010 on an Imperial County project built by Stirling Energy Systems. That start-up hopes to deploy a solar technology that has never been demonstrated on a commercial scale, and most outsiders say its odds of succeeding by next year are low.
Despite its record to
date, SDG&E characterizes its strategy for developing renewables as “aggressive.” But an administrative law judge for the California Public Utilities Commission last year reached a different conclusion.
“The image I get is of a passive process,” said Steve Weissman, the judge who oversaw much of the lengthy review for the Sunrise Powerlink, SDG&E’s controversial plan to build a $2 billion power line to Imperial County. (Weissman, along with a second judge assigned to the case, recommended rejection of the project, partly because they concluded SDG&E did not need the 150-mile-long transmission line to satisfy the state’s 20 percent by 2010 mandate.)
The transmission line, which was approved last month by the commission despite the judges’ recommendation and which won a key federal approval last week, requires an additional federal permit and faces a likely legal attempt by opponents to kill the project. If built, it will generate $1.5 billion in profits for SDG&E shareholders. In fact, the transmission line project was awarded a higher rate of return from regulators — 11.5 percent — than is typically provided to utilities for building generation projects, renewable or otherwise.