In the budget proposal he released this week, House Budget Committee Chairman Paul Ryan made a rather convincing case for why the federal government needs to stop funding renewable energy sources like wind and solar at the expense of fossil fuels, pointing to the Obama administration’s trend of bankrolling failed projects.
While you may have only heard about the fallout from Solyndra, the bankrupt solar startup that received a $535 million federal loan guarantee from the Department of Energy, Ryan, a Wisconsin Republican, highlighted two other “failed” solar projects the Obama administration continues to waste money on.
The SolarReserve project in Nevada and the Mesquite Solar 1 project in Arizona were just “latest ill-fated ventures” which have pilfered more than $1 billion in taxpayer money, Ryan argued in his budget.
There’s only one problem with this claim: it’s simply not true.
The Mesquite Solar project, which received a $337 million loan guarantee, is already in operation and has a 20-year power purchase agreement with California’s Pacific Gas & Electric. The SolarReserve project, which received a $737 million loan guarantee, has a 25-year agreement with NV Energy for when it begins producing electricity later this year.
“We were really taken aback by the statements in Congressman Ryan’s budget proposal, it’s completely inaccurate,” Kevin Smith, SolarReserve’s CEO, said in an interview with Platts this week. “Clearly they had some misinformation. We’re on budget and on schedule, and the project is really a great success story.”
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Construction on SolarReserve’s Crescent Dunes Solar Energy Project, a 110-MW solar thermal power facility, began in 2011, creating roughly 450 jobs.
In a letter sent to Ryan Tuesday, Smith said the project will pay over $300 million in estimated interest payments to the federal government as well as the principal repayment of the original loan. “The loan guarantee program is actually a revenue generator for the US government,” Smith wrote.
Ryan, the Republican vice presidential nominee in last year’s presidential race, has gained a reputation for false claims and misleading statements and, the Center for American Progress argued this week, the energy portion of the budget was no exception.
“It contains so many false or misleading attacks on clean energy that you could be forgiven for thinking that some of it just sounds, well, ridiculous,” the clean energy advocacy group wrote in a post outlining misleading statements in Ryan’s proposal.
Errors and all, the Ryan budget is not expected by anyone to become law as is, it’s seen as more as the opening salvo in a likely protracted budget battle with Democrat.
On Wednesday, Senate Budget Chairwoman Patty Murray, a Washington Democrat, released her own budget blueprint, one that shows some pretty dramatic differences from the Republicans hopes for energy policy.
In her proposal, Murray stressed the importance of US oil and gas reserves “as a bridge to a clean-energy future,” but it provides only enough funding for the Interior Department to follow “its established leasing plans while increasing funding for our onshore and offshore oversight agencies to ensure that resource extraction is done in a way that provides environmental safeguards.”
In contrast, Ryan’s proposal pushed for expanded domestic drilling on public lands onshore and offshore, and approval of the Keystone XL oil pipeline, as ways to reduce the federal deficit. “By allowing for the opening of federal land and the Outer Continental Shelf to drilling, this budget moves our country toward the goal of North American energy independence,” Ryan wrote.
The capital cost of the Solar Reserve Nevada plant is $750+ million for 110 MW nameplate capacity. The per hour kW PPA price is 13.5 cents. The Mesquite plant is $600 million for 150 MW. The per hour price is also likely around the Solar Reserve number.
The wholesale price for power in the region is around 4 cents. Thus, the power from these projects costs 3x market rates, and that’s after PTCs, ITCs, loan guarantees, etc.
This suggests that about 70% of the cost of the plants is subsidy, in this case, from rate payers, not taxpayers. Seventy percent of $1.35 bn is $950 bn, and more if we allow for other Federal support schemes.
Paul Ryan’s math is just about right, I think, with the exception that Nevada rate payers, and not taxpayers, will carry most of the burden.
This is an excellent point and certainly these factors should be considered when judging the relative success of these or other renewables projects spurred by government subsidies. However, I believe you’re giving Ryan’s budget credit for being far more nuanced than it actually is. Ryan’s proposed budget didn’t compare capital costs, regional wholesale prices or subsidies, it simply said these two projects, like Solyndra, “failed”. He could have said these projects, due to current market fundamentals, have the potential to fail, but that’s certainly not what he said.