SCE ProLogis Solar Deal - Who pays?

Yesterdays announcement that ProLogis had agreed to lease roofspace to SCE for solar arrays raises some interesting issues for the industry, most importantly, can private sector PPA based solar integrators be competitive with public utilities?

Arno Harris thinks so. He is the CEO of Recurrent Energy, so of course he has to!

The biggest question is whether the public (and the many public watchdog groups) will support the rate hikes that SCE will propose to finance this project. Should ratepayers finance SCE's entry into yet another profitable business for SCE? What does this say about using regulated/captive customer bases as a competitive advantage over private enterprise?

This is also an interesting deal for ProLogis. Arno Harris says he knew that SCE and ProLogis were talking, but doesn't indicate why they went with SCE instead of Recurrent Energy or some other PPA company. You would have to think it was simple economics. Presumably, ProLogis would make more from leasing the roofs to SCE that it would selling power to tenants. Again this raises the competition question.

Mr. Harris also says the deal "Doesn’t Serve ProLogis’ Tenants or Green their Buildings – This sounds like a great deal for SCE and ProLogis—but it doesn’t allow ProLogis to make any green claims about their properties and it provides no benefits for their tenants. From what we can see, all the green benefits go to SCE and ProLogis just gets some roof rent."

I am not sure I follow that argument. If you make your rooftop available to solar, the equipment is installed and generated power that is replacing other less green power, presumably you have "greened" your building. Hard to see how the "greenness" depends on who you sell or provide the power to. Also, it seems that ProLogis received plenty of positive publicity and the other "warm fuzzy" factors an institutional landlord presumably cares about when doing green deals yesterday.

I do however agree with his observation that it remains to be seen whether this plan really gets off the ground, or whether it dies at the feet of the CPUC (failing to approve rate increases to pay for it) or other reasons. Lastly, if the deal does get done, it will be interesting to observe this massive plans effect on supplies of solar panels, inverters, etc. Supplies could well tighten and make other projects unfinanceable for ReCurrent Energy and others in the PPA business.

California Solar Initative - Affordable Multifamily Program

The CSI is making progress on the long promised program for affordable multifamily housing. A draft staff proposal was submitted on February 29, 2008 and a public hearing was held this week. Presumably the program should be available in the next 90 days.

This one is going to go fast, even faster than the commercial CSI, which in many areas is now all the way down to step 5 ($.22 per KwH). The affordable multifamily program is only slated to get $100M and the subsidy will be an EPBB, and may be as high as $3 per watt! This subsidy, combined with the federal tax credit (at least through the end of 2008!) and depreciation means that it should be possible to offer solar systems to property owners at very little (or no) capital cost and relatively competitive power purchase rates and terms.

Again, I imagine this will be a "race to file" in order to reserve these credits. Property owners should be out getting all their engineering and pricing done now!