Obama's Costly Green Jobs Project

The transcript of President Obama's weekly address on whitehouse.gov is titled, "President Obama Lauds Clean Energy Projects as Key to Creating."  Creating what? one might ask.  The word "Jobs" seems to be missing, perhaps like the jobs themselves.

The President loves to talk about green jobs -- so much so that after his speech the DailyKos reassured the left wing base that the whole jobs thing is a smokescreen:

President Obama's major selling point for clean energy technology this morning is jobs, jobs and more jobs. He does indeed talk a bit about the planet...[but] he shrewdly uses the job creation argument to bludgeon the naysayers who authored the recent Republican Pledge.

The "clean energy" poster child of the week is a new solar energy plant in Ivanpah, California, praised by the President:

I want share [sic] with you one new development, made possible by the clean energy incentives we have launched.  This month, in the Mojave Desert, a company called BrightSource plans to break ground on a revolutionary new type of solar power plant.  It's going to put about a thousand people to work building a state-of-the-art facility.  And when it's complete, it will turn sunlight into the energy that will power up to 140,000 homes - the largest such plant in the world.

It's worth looking at this model clean energy project more closely.

To begin with, Obama is correct that Ivanpah "is going to put about a thousand people to work."  This figure however is the peak work force during construction.  According to Brightsource the average workforce over the three years of construction is 650 workers -- union workers, naturally.  Brightsource, whose CEO John Bryson was a co-founder of the Natural Resources Defense Council in 1969, reports that Ivanpah is a "labor-friendly project."

As with any construction project, jobs created by a specific project are temporary, and once the Ivanpah project is completed in 2012 (after the election, perhaps), the workforce will drop to 86. (The White House states clumsily that "its operations will create 86 operations and maintenance jobs.")  Eighty-six new jobs is better than a sharp stick in the eye, but it's way less than the 1,000 jobs the President uses to bludgeon the naysayers.

The President also touts Ivanpah as "the largest such plant in the world."  Ivanpah's 370 megawatt capacity is not insignificant, especially in comparison with the rooftop solar panel arrays one thousandth the size that are lauded indiscriminately in the press, and it is a welcome addition to the nation's power generating capacity.

Ivanpah however produces what is described as "intermittent" power.  Fortunately, the sun shines in the Mohave Desert during peak demand for air conditioning in Los Angeles, but the California Public Utilities Commission confesses that:

the State will face an increasing challenge to integrate the higher intermittent renewable penetration without decreasing system reliability [i.e., brownouts and blackouts].  As a result, the California Independent System Operator (CAISO) has initiated a study of the ancillary resources necessary to maintain grid reliability with a 33% RPS [Renewable Portfolio Standard, slated to increase from 20% to 33% pending a vote this week by the California Air Resources Board].

In other words, in order to avoid blackouts, they'll have to duplicate some of the capacity supplied by renewable energy with "ancillary resources" (coal, natural gas, nuclear) to cover the times when it's dark or the wind isn't blowing.

Obama describes the Ivanpah's size with the weasel phrase "up to 140,000 homes."  An average home uses around 9,000 kwh annually, and 140,000 houses need an annual power output of 1,260 gigawatt hours.   If Ivanpah operated at 100% of its 370 Mw capacity round the clock, it would produce 3,241 gwh, which means the plant is operating at 38.8% of its full capacity.  The average capacity factor of solar plants in the Mohave Desert is 19%, so either Ivanpah is twice as efficient as the average, or "up to 140,000 homes" really means "70,000 homes."

For comparison, not far across the Arizona border the zero carbon Palo Verde nuclear power plant has a generating capacity of 3,942 megawatts, over ten times that of Ivanpah.  Palo Verde produces 26,782 Gwh annually, a capacity factor of 82% of the 32,753 Gwh it would produce at 100% capacity.   This is slightly below the nuclear industry average of 91%.   Thus Palo Verde has 10 times the capacity of Ivanpah, and produces 21 times the electricity.

Then there's Obama's phrase, "made possible by the clean energy incentives we have launched." The White House reports that "the Recovery Act is investing over $90 billion in clean energy," which includes a $1.37 billion loan guarantee for Ivanpah.  It's interesting that Ivanpah's price tag is listed at $1.1 billion.  It's tough to get credit these days, but I guess if you have a green energy project, you get your money plus a 25% bonus.

Brightforce therefore doesn't have to worry about financing the project.  Solar power unfortunately is an expensive proposition.  Reuters reports that the Ivanpah's $1.1 billion construction cost works out to $2,800 per kilowatt.  "In contrast, it costs about $900 per kW to build a combined-cycle natural gas plant."  Construction costs are amortized over the thirty-year life of the plant, but one wonders how Brightforce can possibly repay their loan selling a costly product in a competitive energy market.

Not to worry, the energy market isn't all that competitive.  As mentioned above, Californian investor-owned utilities (referred to as IOUs) are required by the California Public Utilities Commission's Renewable Portfolio Standard to purchase 20% of their power by the end of 2010 from renewable energy sources like solar and wind.

The California Public Utilities Commission recognizes that renewable energy is more expensive than conventional energy, and it's willing to pay for it through a slush fund called the Above Market Fund (AMF).  In 2009, the CPUC reports that three utilities were allocated AMF funds of $773 million, and two of the three, Pacific Gas & Electric and San Diego Gas & Electric, had already exhausted their funds by the third quarter of 2009.

Brightforce has signed contracts with PG&E and Southern California Edison, although strangely the price the utilities are paying is confidential.  In my home state, Massachusetts NSTAR has agreed to purchase electricity from Cape Wind at 18.7 cents/kwh, more than twice the going rate of 8.8 cents/kwh from natural gas power plants.  PG&E has disclosed a 25-year contract to purchase power from the AV Solar Ranch One plant for 13.3 cents/kwh, which compares to the national average for all sectors reported by the EIA of 10.2 cents/kwh.

So there's really no way the Ivanpah business model can lose.  Up-front financing and price guarantees for thirty years down the road.  So who might benefit from such a cozy government-business arrangement?

Brightsource investors include Google.org (a member of Van Jones's Apollo Alliance) and the California State Teachers Retirement System.  Billions in federal financing, billions every year for the next thirty years in taxpayer subsidies for above-market priced electricity, with profits going to Obama insiders like the Apollo Alliance and a teachers' union?  Should we really call this "clean" energy?
The transcript of President Obama's weekly address on whitehouse.gov is titled, "President Obama Lauds Clean Energy Projects as Key to Creating."  Creating what? one might ask.  The word "Jobs" seems to be missing, perhaps like the jobs themselves.

The President loves to talk about green jobs -- so much so that after his speech the DailyKos reassured the left wing base that the whole jobs thing is a smokescreen:

President Obama's major selling point for clean energy technology this morning is jobs, jobs and more jobs. He does indeed talk a bit about the planet...[but] he shrewdly uses the job creation argument to bludgeon the naysayers who authored the recent Republican Pledge.

The "clean energy" poster child of the week is a new solar energy plant in Ivanpah, California, praised by the President:

I want share [sic] with you one new development, made possible by the clean energy incentives we have launched.  This month, in the Mojave Desert, a company called BrightSource plans to break ground on a revolutionary new type of solar power plant.  It's going to put about a thousand people to work building a state-of-the-art facility.  And when it's complete, it will turn sunlight into the energy that will power up to 140,000 homes - the largest such plant in the world.

It's worth looking at this model clean energy project more closely.

To begin with, Obama is correct that Ivanpah "is going to put about a thousand people to work."  This figure however is the peak work force during construction.  According to Brightsource the average workforce over the three years of construction is 650 workers -- union workers, naturally.  Brightsource, whose CEO John Bryson was a co-founder of the Natural Resources Defense Council in 1969, reports that Ivanpah is a "labor-friendly project."

As with any construction project, jobs created by a specific project are temporary, and once the Ivanpah project is completed in 2012 (after the election, perhaps), the workforce will drop to 86. (The White House states clumsily that "its operations will create 86 operations and maintenance jobs.")  Eighty-six new jobs is better than a sharp stick in the eye, but it's way less than the 1,000 jobs the President uses to bludgeon the naysayers.

The President also touts Ivanpah as "the largest such plant in the world."  Ivanpah's 370 megawatt capacity is not insignificant, especially in comparison with the rooftop solar panel arrays one thousandth the size that are lauded indiscriminately in the press, and it is a welcome addition to the nation's power generating capacity.

Ivanpah however produces what is described as "intermittent" power.  Fortunately, the sun shines in the Mohave Desert during peak demand for air conditioning in Los Angeles, but the California Public Utilities Commission confesses that:

the State will face an increasing challenge to integrate the higher intermittent renewable penetration without decreasing system reliability [i.e., brownouts and blackouts].  As a result, the California Independent System Operator (CAISO) has initiated a study of the ancillary resources necessary to maintain grid reliability with a 33% RPS [Renewable Portfolio Standard, slated to increase from 20% to 33% pending a vote this week by the California Air Resources Board].

In other words, in order to avoid blackouts, they'll have to duplicate some of the capacity supplied by renewable energy with "ancillary resources" (coal, natural gas, nuclear) to cover the times when it's dark or the wind isn't blowing.

Obama describes the Ivanpah's size with the weasel phrase "up to 140,000 homes."  An average home uses around 9,000 kwh annually, and 140,000 houses need an annual power output of 1,260 gigawatt hours.   If Ivanpah operated at 100% of its 370 Mw capacity round the clock, it would produce 3,241 gwh, which means the plant is operating at 38.8% of its full capacity.  The average capacity factor of solar plants in the Mohave Desert is 19%, so either Ivanpah is twice as efficient as the average, or "up to 140,000 homes" really means "70,000 homes."

For comparison, not far across the Arizona border the zero carbon Palo Verde nuclear power plant has a generating capacity of 3,942 megawatts, over ten times that of Ivanpah.  Palo Verde produces 26,782 Gwh annually, a capacity factor of 82% of the 32,753 Gwh it would produce at 100% capacity.   This is slightly below the nuclear industry average of 91%.   Thus Palo Verde has 10 times the capacity of Ivanpah, and produces 21 times the electricity.

Then there's Obama's phrase, "made possible by the clean energy incentives we have launched." The White House reports that "the Recovery Act is investing over $90 billion in clean energy," which includes a $1.37 billion loan guarantee for Ivanpah.  It's interesting that Ivanpah's price tag is listed at $1.1 billion.  It's tough to get credit these days, but I guess if you have a green energy project, you get your money plus a 25% bonus.

Brightforce therefore doesn't have to worry about financing the project.  Solar power unfortunately is an expensive proposition.  Reuters reports that the Ivanpah's $1.1 billion construction cost works out to $2,800 per kilowatt.  "In contrast, it costs about $900 per kW to build a combined-cycle natural gas plant."  Construction costs are amortized over the thirty-year life of the plant, but one wonders how Brightforce can possibly repay their loan selling a costly product in a competitive energy market.

Not to worry, the energy market isn't all that competitive.  As mentioned above, Californian investor-owned utilities (referred to as IOUs) are required by the California Public Utilities Commission's Renewable Portfolio Standard to purchase 20% of their power by the end of 2010 from renewable energy sources like solar and wind.

The California Public Utilities Commission recognizes that renewable energy is more expensive than conventional energy, and it's willing to pay for it through a slush fund called the Above Market Fund (AMF).  In 2009, the CPUC reports that three utilities were allocated AMF funds of $773 million, and two of the three, Pacific Gas & Electric and San Diego Gas & Electric, had already exhausted their funds by the third quarter of 2009.

Brightforce has signed contracts with PG&E and Southern California Edison, although strangely the price the utilities are paying is confidential.  In my home state, Massachusetts NSTAR has agreed to purchase electricity from Cape Wind at 18.7 cents/kwh, more than twice the going rate of 8.8 cents/kwh from natural gas power plants.  PG&E has disclosed a 25-year contract to purchase power from the AV Solar Ranch One plant for 13.3 cents/kwh, which compares to the national average for all sectors reported by the EIA of 10.2 cents/kwh.

So there's really no way the Ivanpah business model can lose.  Up-front financing and price guarantees for thirty years down the road.  So who might benefit from such a cozy government-business arrangement?

Brightsource investors include Google.org (a member of Van Jones's Apollo Alliance) and the California State Teachers Retirement System.  Billions in federal financing, billions every year for the next thirty years in taxpayer subsidies for above-market priced electricity, with profits going to Obama insiders like the Apollo Alliance and a teachers' union?  Should we really call this "clean" energy?