The anchor Imperial Valley renewable energy project that would feed San Diego Gas & Electric’s $1.9 billion Sunrise Powerlink transmission line is on the verge of collapse. SDG&E, since 2005, has had an approved power purchase agreement with developer, Tessera Solar. Under it, the company is supposed to begin delivering energy to SDG&E by the end of 2012. However, since the California Public Utilities Commission approved the deal, the project has experienced difficulties that resulted in contract amendments and downsizing from 900 MW to 709 MW. “It’s obviously an unfortunate development,” said SDG&E spokesperson Art Larson. “But, we are remaining hopeful.” Observers say the economics of the project--which envisions using thousands of Dish Stirling engines to covert solar energy into electricity--have been troubled from the start. Dish Stirling technology has “never worked,” said Bill Powers, an independent energy engineer. SDG&E merely used Tessera’s project as a “marquee” justification for the Sunrise transmission line, he added. An SDG&E advice letter filed with the CPUC last year bore out difficulties with the Tessera project. It indicates that to keep the solar thermal project alive the utility agreed to several changes in its power purchase agreement, including an “updated project schedule and pricing terms.” The new terms, however, were blacked out under CPUC rules that allow confidentiality for financial data on power purchase agreements. Under CPUC terms of approval for the Sunrise transmission line, SDG&E is supposed to replace any Imperial Valley renewable projects that fail to materialize with projects that produce an equivalent amount of renewable energy in the valley. Independent Energy Producers policy director Steven Kelly suggested that if the utility goes ahead and builds the line, developers will build alternative energy projects. “There are thousands of megawatts of renewable resources in Imperial Valley,” he said. “The problem historically has been a rich resource area with no transmission.” In effect, Tessera’s demise would create a new opportunity for other developers as long as the line is built. Larson said that despite court challenges and the troubles with Tessera, construction of the line remains underway. The likely collapse of Tessera’s project leaves SDG&E with three new CPUC-approved projects in the valley. They would supply 60 MW of new geothermal power and another 140 MW from a photovoltaic project that regulators backed on Jan. 13. The Sunrise line can transmit 1,000 MW of power. But Larson said the utility has deals for some 500 MW of renewable energy in and around the valley--some not yet reflected in available CPUC data. In addition, it is negotiating for another 600 MW. Last November, for instance, SDG&E announced an additional deal for another 130 MW photovoltaic project in Imperial Valley. SDG&E’s efforts to broaden its renewable energy purchase contracts in the valley come as Tessera has been unable to line up financing or a federal cash grant to date, according to company spokesperson Janette Coates, though the company still is trying. She also acknowledged that Stirling Energy Systems--Tessera’s equipment supplier affiliate--has not started manufacturing any of the Dish Stirling engine “Sun Catcher” units that are to turn solar energy into power at the facility. Coates further confirmed that both Tessera and Stirling went through a “restructuring” last month at the directive of NTR, the Irish holding company that owns both companies. The restructuring resulted in layoffs of a substantial number of employees at both companies, according to Brett Prior, GTM Research senior analyst, who follows the solar industry. Prior predicted that Tessera’s Imperial Valley project will go the same route as its Calico project went last month. Tessera sold the development rights for that 850 MW solar thermal project slated for the Mojave Desert to K Road Power, a small energy project developer based in San Diego. K Road plans to convert the project from Dish Stirling engines to photovoltaic technology (Current, Jan. 7, 2011). Southern California Edison foreshadowed the trouble with the Calico project last month when it cancelled its power purchase agreement with Tessera. Edison moved after NTR chairman Tim Rocha issued a statement last November which said that “despite significant advances” the Dish Stirling technology “will require a longer timeframe than previously envisaged.” Rocha went on to state that NTR would restructure Stirling and Tessera “to take account of this longer timeframe.” In his statement, Rocha admitted that NTR’s subsidiaries have been unable to line up financing for their two major California projects. His statement came in conjunction with NTR financial results, showing the holding company has lost €286 million over the past year (about $380 million). Prior explained that Dish Stirling solar technology has proven to be too expensive. He estimates that SDG&E planned to pay 17 cents/kWh for the Imperial Valley project’s output. However, he said that given the cost of the project the payments would not yield a significant enough return to entice investors, even with a 30 percent federal cash grant and other potential tax incentives. “The economics are going to be pretty much identical at Imperial” to the financial realities that derailed the Calico project, Prior said. Consequently, he believes Tessera may be looking for a company that would buy the development rights in Imperial and convert the project to photovoltaic technology. If it does, he added that whoever buys it would have to negotiate a new power purchase agreement and obtain amended construction permits, which will take time.
