2nd APS solar plant may surpass energy target

by Ryan Randazzo - May. 22, 2009 12:00 AM
The Arizona Republic

Arizona Public Service Co. is teaming with a defense company and private-equity firm to build another solar-power plant west of Phoenix that could help it surpass state-imposed alternative-energy requirements.

The $1.5 billion plant, to be built and run by Lockheed Martin Corp., should be operating by 2013 and, in combination with other projects, would give APS double the 4.5 percent of electricity from renewable sources required by 2014, the companies said Thursday.

APS says the Starwood Solar I power plant, to be financed and owned by Starwood Energy Group of Connecticut, is a sign of its growing commitment to renewable energy.
With Congress moving on laws to limit greenhouse-gas pollution, APS officials said solar plants are a better option than coal, natural-gas or nuclear plants to supply the state's growing power demands, regardless of the state requirements.

"We've set our business plan in place, and solar is it," CEO Don Brandt said Thursday. "We view solar power and energy efficiency as our best alternatives now and in the best interest of our customers."

The plant will occupy about 3 square miles of farmland in the Harquahala Valley 75 miles west of the Phoenix city limits. With a 290-megawatt capacity, the plant will provide enough energy to power 72,500 homes while the sun shines, and it will keep the power flowing six hours after sunset by storing heat.

The plant will use solar-thermal technology. Instead of black solar panels, curved mirrors will focus sunlight on tubes of fluid. That fluid will heat water and make steam to spin a turbine and generate electricity.

Some of the heat will be stored in molten salt so the plant can continue to make steam and energy after sunset.

Starwood Solar I will be slightly larger than the Solana Generating Station, which Spanish company Abengoa Solar Inc. announced last year that it was developing in Gila Bend and which also will sell all its power to APS.

Abengoa is still seeking financing for Solana amid a global credit crunch, and the project's 2011 opening has been pushed back, Brandt said.

Starwood Energy is an affiliate of a private-equity firm by the same name, and company officials said they don't expect a problem financing the new plant.

Starwood will pursue private and Energy Department financing, CEO Brad Nordholm said.

"The markets have been very thin but will be improving," he said. "For a project that has a strong (purchase agreement), strong sponsor and strong construction contracts, like we have, we believe the markets are open."

APS officials will seek approval of the contract from the Arizona Corporation Commission, which regulates utility rates.

The commission requires that utilities get 15 percent of their energy from renewable sources by 2025, with incremental targets along the way.

In 2014, the requirement is 4.5 percent, but APS will be getting 9 percent of its energy from renewable sources if both plants progress as planned and won't need more renewable energy to meet its requirement until 2019.
"We've got limited options between now and 2020," Brandt said. "Coal is not viable because of the carbon costs and the expense, and I don't think anybody believes this country will build a new nuclear reactor before 2020."

To help pay for its renewable-energy efforts, APS charges customers a monthly fee, now capped at $3.17 for residential ratepayers. The utility will ask regulators to approve a fee increase to help pay for energy from the new plant.

Officials couldn't say how much the tariff would increase but did say the solar energy would be less costly to ratepayers than buying energy from coal or natural-gas plants if Congress approves the greenhouse-gas restrictions being considered.

APS will spend more than $100 million a year, or $4 billion over 30 years, buying the plant's power.

The company will pay about 8 percent more for the solar power than for power from natural-gas plants, said Pat Dinkel, APS' renewable-energy director. But if the greenhouse-gas legislation is enacted, or natural-gas prices rise, solar power will be about even with traditional power, he said.

Corporation Commission Chairwoman Kris Mayes said that even if APS customers have to pay slightly more for the energy, more solar power is a better investment for ratepayers than traditional power plants.
"If we didn't build these renewable projects, rates would go up even more because we'd be reliant on coal-fired power generation, which is about to be taxed by Congress," she said. "I am a believer in investing in nuclear energy, but when you look at the cost, it is actually more expensive megawatt for megawatt compared with solar."

A Lockheed official said the Maryland-based defense company will bring its engineering expertise from satellite and missile programs to the energy industry, which he predicts will be an important part of the company's future.

"We view energy as a national-security issue," said Chris Myers, Lockheed's vice president of energy programs.
"We are a global security company," Myers added. "We work on products that help protect the U.S., our friends and our allies. This (solar-power plant) still is part of the global security environment in my view."