DEALMAKING IN NEW ENERGY

A Rare Peek at Green Energy Economics
Todd Woody, August 24, 2009 (NY Times)

"California regulators have approved contracts for more than 8,600 megawatts of renewable energy, to be generated mostly by big solar power plants for the state’s largest utilities. But the details of those deals and the emerging economics of green energy often remain shrouded in secrecy, subject to confidentiality agreements.

"…[But] when the California Public Utilities Commission gave the green light to two 25-year power purchase agreements [for 1,310 megawatts of solar electricity] between Pacific Gas & Electric and BrightSource Energy …the utilities commission also signed off on an apparently first-of-its-kind technology royalty agreement between BrightSource and PG&E."

Schematic of the Brightsource technology. (click to enlarge)

"…BrightSource will generate electricity from two of seven solar thermal power plants the company is building in the Mojave Desert, to supply PG&E with a total of 1,310 megawatts. In an unusual twist, the utility has agreed to pay BrightSource a higher electricity rate if the start-up fails to secure a Department of Energy loan guarantee to help finance the construction of the two power plants.

"The loan guarantee program is designed to promote development of renewable energy by allowing companies like BrightSource to obtain lower-cost financing for the billions of dollars needed to build large-scale solar farms…"

The Brightsource technology. (click to enlarge)

"The deal prompted an unsuccessful protest from the Division of Ratepayer Advocates, a state agency that promotes utility customers’ interests. The ratepayer advocate argued that BrightSource did not receive such favorable terms when it agreed to provide 1,300 megawatts of electricity to Southern California Edison, another state utility, using the same technology…Utility commissioners also approved an agreement between BrightSource and PG&E that calls for the start-up to pay the utility royalties based on the worldwide sales and licensing of BrightSource’s solar “power tower” technology.

"…Keely Wachs, [of BrightSource], said he could not provide any details of the royalty agreement or why it was struck due to confidentiality provisions of the deal…This is the first royalty agreement PG&E has made in connection with a power purchase agreement, according to Jennifer Zerwer, a spokeswoman for the utility. She said the utility could not disclose whether the royalty contract was tied to the electricity rates PG&E will pay BrightSource…"