Archive for September 2011

More California farmers invest in solar power

By Kate Campbell

Editor’s note: California farmers and ranchers lead the nation in use of solar power. At the same time, government renewable-energy mandates have added pressure for conversion of productive farmland for utility-scale solar energy projects. In a two-part series, Ag Alert® looks at the effects on agriculture from solar power. This week: how farmers have embraced solar power on their operations.

With harvest in full swing, trucks laden with bell peppers, watermelon and onions unloaded at a rapid pace last week at Morada Produce near Linden. Crews washed and packed the produce into boxes before a chain of forklifts carried the market-bound food to coolers.

Harvest activity is being played out across California right now, but there’s something different about Morada Produce: The company’s energy-intensive packing and cooling activities are costing a fraction of what electricity bills totaled in the past.

Skip Foppiano, owner of Morada Produce, pointed to a newly installed two-acre, 390 kilowatt solar energy system outside his office. The once-unpaved employee parking lot is now shaded by four canopies of solar photovoltaic panels that measure more than 40,000 square feet.

The company spent nearly a year researching solar technology to determine the best system for its needs and carefully analyzed the investment decision to determine cost benefits and eventual payback. Foppiano said the new system supplies 60 percent to 70 percent of the energy needed for the farm’s packing and cooling activities.

The solar energy is delivered from the onsite system when utility rates are at their highest, he explained.

“Our family has been farming here since the Gold Rush,” Foppiano said. “We’ve always tried new technology to stay competitive. Solar helps us do that and it’s the right thing to do for the environment.”

Foppiano said the farming operation worked very closely with Pacific Gas and Electric Co., county government and the equipment vendor to complete the project. An investment tax credit and historically low interest rates helped make the system “pencil out,” he said, adding that payback will take about nine years—or less—depending on future energy prices.

An increasing number of California farmers are doing the math and deciding that 20 to 25 years of reduced energy costs makes sense, solar experts say.

Already, California agriculture leads the nation in renewable energy production. But with state government incentives aimed at generating 33 percent of the state’s generating capacity from renewable energy sources by 2020, agriculture has been investing in solar technology at an increasing rate.

Many wineries, nut processing and packing operations have installed photovoltaic panels during the past decade. But now, lower-priced equipment and technological advances have encouraged more farms and agricultural businesses to consider solar power.

A 2009 U.S. Department of Agriculture survey found that California leads the nation in on-farm renewable power generation in all categories: wind turbines, methane digesters and solar panels. But when it comes to using solar panels, California farms account for about 25 percent of the total installed on farms nationwide.

“It all comes down to finding the technology that makes financial sense,” said Holli Tamas of Granite Bay Energy, which designs and installs solar energy systems, including projects for agricultural customers.

“Farms are unlike many of our commercial customers who look at shorter payback times,” Tamas said. “Farmers whose families have been in business generations are more likely to think ‘I’m still going to be here in 10 or 20 years.’ Farmers are very savvy about these kinds of investments.”

There is a distinct difference between energy generated on-site for equipment operation and heating and cooling. This is different than power generated for sale and distribution on the electric grid.

In Sierra County, hay grower and cattle rancher Dave Roberti has been putting the finishing touches on a 500 kilowatt system that tracks sunlight to power nine 100-horsepower irrigation pumps.

“Originally, we looked at wind power because we thought we were in a windy spot,” Roberti explained. “But instead, at 5,000 feet, we found we’re in an ideal location for solar energy production year-round, even when it’s cold and snowy. After we ran the complete analysis, we found solar gave us the best bang for the buck.”

He said the technology offered a way to lock in costs for operating the ranch’s irrigation pumps.

“When the system goes online, we’ll be producing power for just about what our retail rates are,” said Roberti, who is a California Farm Bureau director. “It’s a no-brainer. In about 10 years, the system will be paid off. I’m trading payments to my utility for payments on an equipment mortgage. The difference is, there’s a payoff on the equipment.”

Because Roberti buys power from a rural electric district, he was not eligible for incentives from the California Solar Energy Initiative, which is overseen by the California Public Utilities Commission.

The 10-year, nearly $3 billion program provides incentives for solar system installations to residential and commercial customers of the state’s three investor-owned utilities: PG&E, Southern California Edison and San Diego Gas and Electric.

Incentive funding for solar projects in PG&E and SDG&E service territory is no longer available for non-residential projects. Officials at the CPUC said commercial applicants will be put on a wait list.

Ventura County lemon grower Limoneira installed a 900 kilowatt solar array next to its processing facility about three years ago. Harold Edwards, Limoneira CEO, said the company had been exploring solar power generation for about 10 years, but couldn’t find a way to justify the investment economically.

“But, as the price of the panels has come down, and with a sale-and-lease-back arrangement, we began to see that the cost benefit was adequate,” Edwards said. “But it’s not just about dollars and cents. Not only is it good for the environment, but as we have the opportunity to host tours and school groups, it’s also a great opportunity to talk about agriculture and how it works with the environment.

“It’s amazing the way our investment in solar technology is working out,” he said.

Next week: Renewable-energy mandates touch off a new land rush, as developers of utility-scale solar projects propose to convert productive farmland.

(Kate Campbell is an assistant editor of Ag Alert. She may be contacted at kcampbell@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.

Spurned By DOE, First Solar Hunts For Solar Farm Buyer

By Cassandra Sweet and Ryan Tracy

-DOE says First Solar is not eligible for $1.9 billion loan guarantee for 550-megawatt Topaz solar farm

–First Solar says it is in “advanced talks” with potential buyers of the Topaz facility

–Shares close down 9% at $66.85, lowest level seen in more than four years

(Adds response from Royal Bank of Scotland in 9th paragraph.)

First Solar Inc. (FSLR) said Thursday that the Department of Energy will not provide a loan guarantee to help finance construction of a large California solar farm, but the company is in “advanced discussions” to sell the project.

The Tempe, Ariz., solar-panel maker and solar-farm developer said that the DOE informed the company that there was not enough time to process the company’s $1.9 billion loan guarantee application for the 550-megawatt Topaz solar farm to meet a statutory Sept. 30 deadline for closing the transaction.

“We weren’t able to meet the requirements in time for the deadline,” First Solar spokesman Ted Meyer said in an interview. He added that the company was in “advanced talks with potential buyers” to sell the solar power plant and would “utilize a different transaction structure that does not require a DOE loan guarantee.”

Meyer declined to name the potential buyers or provide details on the sale.

The DOE’s disqualification of First Solar’s Topaz project loan guarantee comes as the department faces intense scrutiny following the bankruptcy of solar-panel startup Solyndra Inc., which obtained a $535 million loan guarantee and a $527 million government loan to build a factory in Fremont, Calif. Solyndra is the subject of a federal criminal probe into whether the company misled the government in connection with the 2009 loan guarantee. It filed for bankruptcy protection earlier this month.

The loss of the Topaz loan guarantee sent First Solar shares tumbling 9% to close at $66.85, their lowest close in more than four years.

In June, the DOE offered First Solar conditional commitments of guarantees for $1.93 billion in loans to help finance the Topaz solar farm. Royal Bank of Scotland Group PLC (RBS.LN, RBS) and a group of unnamed institutional investors and commercial banks agreed to make the loans, which were to be guaranteed by the DOE.

It was unclear whether RBS planned to abandon the project or work on a new financial package with different terms.

An RBS spokesman said the bank declined to comment.

A DOE spokesman declined to comment directly on the department’s disqualification of First Solar’s loan guarantee for the Topaz project, but said that closing such transactions is a rigorous process.

“We have consistently said that we will not close any deal until all of the rigorous technical, legal, and financial review has been completed,” said the DOE spokesman, Damien LaVera. “Failure to close a loan application does not indicate that a project doesn’t have merit or a strong business case to succeed, but rather that all of the extensive due diligence and legal documentation simply cannot be completed by Sept. 30.”

First Solar has two conditional loan guarantees still pending, a $1.8 billion guarantee for a 550-megawatt solar farm in Riverside County, Calif., called Desert Sunlight, and a $680 million guarantee for a 230-megawatt solar farm in Lancaster, Calif., called Antelope Valley.

Company spokesmen declined to comment on the outlook for obtaining loan guarantees for the remaining projects. Some analysts expressed hope that First Solar would snag the latter two loan guarantees, although they acknowledged that investors remained jittery following the Solyndra bankruptcy.

“The Solyndra fallout has created a black cloud around the company that is unlikely to clear until projects are announced as sold,” said Jesse Pichel, an analyst at Jefferies Group.

First Solar obtained a $967 million loan guarantee for the 290-megawatt Agua Caliente solar farm in Yuma County, Ariz., which the company sold to NRG Energy Inc. (NRG). PG&E Corp.’s (PCG) San Francisco-based utility has signed a long-term contract to buy the output from the facility, which currently is under construction.

Together, the four projects are expected to create about 1,750 construction jobs and 53 permanent jobs, and generate enough electricity to serve about 470,000 homes.

In July, First Solar obtained a key construction permit to build the Topaz solar farm on previously disturbed land in San Luis Obispo County, California. PG&E has signed a long-term contract to buy the output from the Topaz facility.

In August, two local citizens groups filed a lawsuit against the Topaz project with the San Luis Obispo Superior Court. The groups did not file a request for an injunction that could delay construction, allowing the company to start building anytime.

First Solar initially planned to start construction on Topaz Sept. 30 to qualify for the loan guarantee. But the company said Thursday that it does not have a timetable for starting construction.

The company is likely to start construction for most, if not all, its shovel-ready projects by Dec. 31, when a key government incentive for renewable energy projects currently is set to expire.

Pending DOE loan guarantees must be closed and construction must be started on funded projects by Sept. 30, under Section 1705 of the Energy Policy Act of 2005.

Copyright © 2011 Dow Jones Newswires

 

The Solar Sell-off Has Gotten Ridiculous

By Travis Hoium

Solar stocks took another drubbing yesterday, this time on word that Italy’s debt had been downgraded by S&P. If it isn’t changes to a feed-in tariff, it’s economic concerns, or falling oil prices, and now … it’s debt ratings?

The downgrade and solar
Does the Italy downgrade really have anything to do with solar stocks? Ratepayers essentially pay for feed-in tariffs, and Italy’s government finances have little to do with solar, save for setting policy and providing other incentives. And with sustainable changes made to the feed-in tariff earlier this year, I think it is unlikely additional changes will be made soon.

There’s also the fact that solar is one of the few things Italy can point to as a success right now. One of the reason Italy’s debt was downgraded was the prospect of stagnant growth, something the solar industry can help improve.

So while a downgrade of Italy’s debt isn’t good news, don’t you think the market has taken it a little too far this time?

Case of the falling euro
One of the bigger problems for solar manufacturers is a constantly falling euro. That is a concern for China overall, because the EU is a major trade partner with China and is one of the biggest buyers of solar panels from Chinese manufacturers.

That’s one of the reasons we’ve heard about China possibly buying the debt of troubled EU members in recent weeks. If European countries begin to default on their debt and the euro falls, then China will be affected too. China doesn’t want that to happen.

Problems in Europe overshadow solar’s growth everywhere else
Investors are quick to panic over concerns about solar’s demand, but they’re also typically slow to realize where new demand will come from. In 2008, when Spain was a major demand market and feed-in tariffs collapsed from overinstallation, everyone panicked. But Germany and Italy picked up the slack, and 2010 was a record year for the industry.

We will likely see a similar progression, with Germany and Italy becoming slightly smaller but more consistent demand sources within the next year, based on updated feed-in tariff plans. In addition, Japan, China, India, Malaysia, Indonesia, and the U.S. are also growing demand sources. In particular, China and the U.S. have a lot of capacity to build solar plants, and with costs falling, the economics play into solar developers’ hands.

Are all of these companies going bankrupt?
Yesterday a friend asked me, “How long is the solar panic of 2011 gonna last? … These companies are priced like they’re going out of business.” While I don’t have the answer to when the market will see value in solar stocks, I can point to fundamentals that investors increasingly should be considering. Value investors often look at price/book value as a way to gauge a stock’s value. A price/book value less than 1 indicates that a stock may be a good value, while growth stocks typically trade above a ratio of 1.

Japan Renewable Feed-in-Tariff Passes, While Ontario Faces Battles

Published on September 8, 2011 | By Shira Honig
Source: Climatico

While Ontario’s ambitious feed-in-tariff (FIT) policy is being put to the test by domestic and international opposition, including a challenge from Japan, Japan has just achieved a major breakthrough for its own FIT policy as it continues to recover from the tsunami and nuclear disaster this past March. Both examples will have implications for renewable energy policies and trade worldwide.

Currently in place in more than 40 countries – most notably in Germany, whose early leadership made it the world’s leading solar power – FIT policies boost initial development in renewable technologies by providing developers with above-market rates guaranteed over a long-term contract, usually 15-20 years. When designed well, they deliver long-term emissions reductions while providing a stable rate of return for clean-tech developers and reasonable costs for the consumer. When costs are not controlled over time, however, an FIT can be doomed to follow the example of Spain, whose program created a rush of solar development that ultimately led to a bust.

Ontario’s FIT Program Faces Many Challenges

The Green Energy Act (GEA) was passed in 2009 in Ontario, Canada, by the Liberal Party as a way to position the province as a long-term renewable energy leader while phasing out coal, spurring clean-tech investment and boosting the economy by creating jobs through domestic content requirements. The Act’s FIT program covers biomass, biogas, landfill gas, on-shore wind, solar photovoltaics (PV) and waterpower. So far, it has created 13,000 jobs and attracted $20 billionin private-sector investment.

Two years later, however, it is facing three international challenges. First, in a dispute initiated under the World Trade Organization (WTO) last year, Japan is calling the Act’s domestic content requirements a prohibited subsidy that discriminates against imported products and violates key elements of international trade law. Europe likewise objects to the domestic requirements in its own complaint it initiated in the WTO last month. The third challenge comes from Mesa Power Group, owned by T. Boone Pickens, who filed a compaint in July under the North American Free Trade Agreement (NAFTA), alleging that Ontario made last-minute, discriminatory changes to its FIT rules, preventing the company from winning contracts for two wind projects it was hoping to build in the province.

The Act also faces significant domestic opposition in Ontario. Some of the opposition comes from communities fighting the construction of wind turbines in their neighborhoods. Some of it comes from a $7 billion deal made in 2010 between the Ontario government and South Korean-owned Samsung, which has sparked anger and which oddly dismisses Ontario’s own goal of promoting local over foreign companies.

Much opposition comes from the Act’s purported role in rising household energy bills. Conservative Leader Tim Hudak, in advance of a provincial election in October, has promised to cancel the FIT program and the Samsung contract, hoping he can oust the Liberals on the perception that the Act’s rising costs hurt the economy. Yet as Pembina Institute shows, the rising prices are due to such factors as the introduction of smart metering and the much-needed replacement of aging infrastructure – and prices would rise even without renewable investment. Others note that prices are expected to fall in the long-term.

As Japan Challenges Ontario’s FIT, it Passes its Own

Meanwhile, as the composition of the Ontario-Japan WTO dispute panel got underway, Japan passed a renewable energy FIT law that will go into effect next July. Some details of the policy remain undecided, but the tariff will cover solar PV, wind, biomass, geothermal and small hydroelectric generation. An overall review will occur every three years, and tariffs and contract terms will be reviewed annually.

Given the long-standing political strength of the nuclear industry in Japan, the measure would not have passed if it weren’t for the Fukushima disaster, as well as the controversies surrounding the government’s handling of it. The powerful but heavily criticized Ministry of Economy, Trade and Industry (METI) will not be responsible for implementing the FIT system; rather, that responsibility will go to a special parliamentary committee.

The law reflects the large shift in public opinion on nuclear energy since the tsunami and disaster at Fukushima, as well as the pressure government officials have been under to phase out atomic power. While it may be considered a victory for long-silenced renewable energy supporters, Prime Minister Yoshihiko Noda is attempting to convince a fearful public that Japan’s precarious position cannot be overcome without any nuclear in the mix.

Implications – and Questions – From Both Cases

The implications of these related examples are likely to be significant. For example, Japan’s new policy could help it recover its leadership in solar PV technology, along with Germany, and place it in competition with China, which last month established its own solar FIT program. (In another parallel example, China’s wind FIT program is currently being challenged by the United States for its support of domestic wind turbine manufacturers, considered also to be an illegal protective subsidy).

It is not certain, however, that Japan’s policy, if successful, will affect other countries’ nuclear policies, given that each country’s nuclear energy needs and capacities are different.  It is also not certain whether Japan will implement its own domestic requirements as part of its FIT policy, but this is unlikely while its own case against Ontario remains open.

With regard to Ontario, it is unclear whether its FIT program is more at risk from the three international challenges or from domestic opposition. Certainly, however, a repeal of the Act would render the WTO and NAFTA challenges moot, leaving the protective subsidy question unanswered

EU Joins Japan in Contesting Ontario Renewable Energy Plan

The Canadian province of Ontario’s feed-in tariff (FIT) programme for renewable energy, which is already the subject of a trade row with Japan, came under fire again last month after the EU officially requested its own WTO consultations on the matter. The EU’s request, issued on 11 August, comes on the heels of the global trade body establishing a dispute panel to hear Japan’s complaints against Canada regarding the same programme (see Bridges Trade BioRes, 25 July 2011).

In their August announcement, the EU noted that it had attempted to reach a negotiated solution with Canada on the subject, without any success. The EU noted that, while they welcomed the commitment of Ontario to encourage the use of renewable energy, the Canadian province’s current programme is not in line with Ottawa’s WTO obligations.

Brussels’ show of concern over Ontario’s FIT mechanism, established by the Ontario Green Energy and Green Economy Act 2009, is not new. When Japan first initiated WTO consultations on the FIT in September 2010, both the EU and US were quick to join the discussions (see Bridges Weekly, 7 October 2010).

The EU, Japan, and the US are all major players in the green energy industry, which likely sparked their shared interest in the original case. In the EU’s recent request for its own consultations, Brussels emphasised its role as a “significant” exporter to Canada of wind power and photovoltaic power generation equipment. The EU noted that exports ranged from €300-€600 million from 2007-2009, adding that “these figures could be higher should the local content requirements be removed from the legislation in question.”

European FIT Programmes

EU member states maintain their own FIT programmes, including, for instance, a general renewable electricity purchase obligation for electricity network operators in Germany and a UK FIT programme supporting small-scale generation and on-site supply. These programmes, however, have refrained from introducing local content provisions, as a recent ICTSD study outlines. Also, Germany’s FIT programme is the only measure that was subject to international court proceedings before Ontario found itself at the WTO. In 2001 the European Court of Justice ruled that the German FIT programme was legal.

The FIT mechanism acts as a purchasing guarantee for producers of renewable energy, ensuring access to power grids, providing long-term contracts, and guaranteeing electricity purchase prices. However, the controversy over the Ontario FIT stems not from the overall programme itself, but from a local contract provision that requires energy producers to source up to 60 percent of their inputs from within the province.

Both the EU and Japan allege that this “Buy Ontario”  clause violates the national treatment provisions of three WTO accords: the General Agreement on Tariffs and Trade (GATT), the Agreement on Trade-Related Investment Measures (TRIMS), and is a “prohibited” subsidy under the Subsidies and Countervailing Measures (SCM)Agreement.

The inclusion of the latter agreement in the EU’s and Japan’s complaints could serve to clarify the famously murky relationship between renewable energy support and WTO subsidy rules. The aforementioned ICTSD study found that current WTO rules on government support may apply to each national FIT programme differently.

As a result, WTO members will need to determine whether these options allow for “the right balance between a sufficient margin of manoeuvre to promote sustainable development and address climate change and protection against arbitrary trade restrictions,” or whether the rules need to be re-examined and re-negotiated, the study concludes.

Shortly after the EU filed its complaint, Ontario Energy Minister Brad Duguid openly defended the renewable energy programme, insisting that the province would fight back against both domestic and international critics of the initiative.

“We’re going to stand up for Ontario … And we will against anybody outside of Ontario that wants to threaten our efforts to create jobs,” he affirmed, according to the Toronto Star.

The spokeswoman for the Canadian Department of Foreign Affairs and International Trade, Caitlin Workman,  has also affirmed that the department will “defend Canada’s interests” in the matter.

FIT facing attacks on multiple fronts

Duguid’s spirited support of the measure notwithstanding, the FIT has also elicited some harsh criticism within Canada itself. Ontario’s opposition Progressive Conservative Party has already promised they would eliminate the programme should they win the 6 October provincial election. In addition, the editorial board of the National Post, a right-leaning Canadian newspaper, recently published a strongly-worded op-ed lambasting the FIT only two days after Brussels’ request for consultations.

In the op-ed, the editorial board admonished the proponents of the Ontario FIT, claiming that the programme had been unable to solve the problem of green energy not being “economically feasible.” Furthermore, they insisted, the programme has incurred significant expense with little result; they cautioned that Duguid might soon learn that “green dreams [die] hard.”

Along with facing potential WTO and domestic scrutiny, the Ontario FIT might soon become the subject of a North American Free Trade Agreement (NAFTA) dispute case. In July, American renewable energy company Mesa Power Group announced its intent to file a complaint under the trade pact; the company is based in the US state of Texas, and is owned by billionaire T. Boone Pickens. The Mesa Power Group is claiming that the Ontario programme violates NAFTA’s government procurement provisions, which are more comprehensive than their WTO counterparts (see Bridges Trade BioRes, 25 July 2011).

CTSD Reporting; “Europe Lodges WTO Complaint Against Canada Over Renewable Energy,” BLOOMBERG, 11 August 2011; “EU targets Ontario’s green energy subsidies in WTO complaint,” THE GLOBE AND MAIL, 11 August 2011; “EU challenges Canadian green power rules at WTO,” REUTERS, 11 August 2011; “Ontario’s green energy policies break trade rules, EU says,” TORONTO STAR, 11 August 2011.