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.
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Hi, Joe. I enjoyed your post. The point about green claims is based on how green energy is bought and sold. For every green megawatt-hour generated, regulators grant the generator a renewable energy credit (REC). The REC represents all the "green benefits", ie avoided emissions, associated with that megawatt hour of clean electricity.
RECs are a cricital part of maintaining accountability in green power sales. The buyer of the REC has the exclusive right to claim that they are responsible for the related green benefits. Otherwise we'd end up with a greenwashing nightmare. Consider the situation here: SCE installs a solar power system on a ProLogis building that has FedEx as a tenant--only one solar power system has been installed, have all three of them reduced their emissions? Obviously not.
In the recent announcement, SCE is claiming the benefits of the solar electricity generated--they're using the RECs to meet their legal obligations under California's RPS regulations requiring utilities to source a portion of their electricity from renewable sources. Because SCE is making this claim, it would be triple-counting to allow ProLogis and their tenants to claim the benefits as well. Only one set of emissions has been avoided--so only one party can claim them.
Thanks Arno, sorry it took SO LONG to publish your comment, I didn't realize it was lost somewhere in the moderation process!
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