Ivanpah: Dead Technology Propped Up by California Ratepayers

In February, the New York Times ran a stunning article, “A Huge Solar Plant Opens, Facing Doubt about the Future,” concerning the start of the Ivanpah project, the world’s largest concentrated solar thermal power plant. Situated in California’s Mohave Desert, Ivanpah generates up to 393 megawatts of solar power with 350,000 mirrors arrayed over five square miles, which redirect and focus the sun’s rays in the service of boiling water to drive conventional steam turbines. According to the New York Times report, industry analysts believe that the technology behind Ivanpah is no longer viable on the energy market, even though the project is brand new. It was “stunning,” to me, insofar as negative takes on green energy infrequently appear within The Grey Lady.

Yet the news also must have come as a shock to California ratepayers, who will be responsible for propping up this dead technology for the next two decades. In a recent interview on the invaluable Platts Energy Week with Bill Loveless, BrightSource Energy (the Ivanpah developer) senior vice president Joseph Desmond described the long-term purchasing power agreements his company signed with Pacific Gas & Electric and Southern California Edison as being akin to “building a hotel and having 100% occupancy guaranteed for twenty years the day you open.” Sounds like a great deal—for BrightSource.

It’s not as if Ivanpah’s power will be cheap. The exact terms of these long term contracts, known as purchasing power agreements, are not publicly available. However, we do know that the raw project costs were $2.2 billion, and that the peak power output is 393 megawatts. Because the sun only shines half the day, we can safely give the plant an effective capacity of 200 or so megawatts, although even this energy isn’t dispatchable. So that works out roughly to $2.2 billion for 200 megawatts of unreliable capacity, or $11,000/kilowatt. By comparison, the most recently constructed coal-fired power plant I can think of off the top of my head, Xcel Energy’s 760 megawatt Comanche 3 power plant in Pueblo, Colorado, which was outfitted with the latest, most expensive environmental controls, cost $1,700/kilowatt.*

Ivanpah’s exorbitant cost raises an interesting question: Why would California utilities lock their ratepayers into absurdly unfavorable, long-term contracts for ultra-expensive energy? Because the California government forces them to, that’s why. California’s elected officials have enacted a Soviet-style production quota for green energy: 33% of electricity generation by 2020. Alas, 30 States have enacted such green energy mandates, known as “renewable portfolio standards,” although repeal efforts are gaining momentum as the costs become apparent.

*Of course, the sun’s rays are free. But coal is cheap, and capital costs to generate coal-fired electricity are ascendant relative to fuel costs. (The opposite is true for natural gas power plants, even with historically cheap fuel prices wrought by a revolution in drilling known as hydraulic fracturing, or “fracking.”) Also, the non-fuel, operational costs of keeping 5 square miles of mirrors pointed at the sun must dwarf that of running a coal-powered boiler.