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California Approves Abengoa Solar Deal, Cost Disputed

(Corrects commissioner’s name in sixth paragraph of story published Nov. 10.)

Nov. 10 (Bloomberg) -- Abengoa SA, a Spanish engineering company, received regulatory approval to sell utility PG&E Corp. the output from its 250-megawatt solar-thermal project in California’s Mojave Desert amid concern over its high cost.

The 25-year contract is more expensive than PG&E’s other procurement options, though its other benefits for the utility “warranted approving the project,” the California Public Utilities Commission said today in an e-mailed statement. Terms weren’t disclosed. Abengoa’s project is supported by a $1.2 billion U.S. Energy Department loan guarantee.

Under a state law, California utilities must procure 33 percent of their energy from renewable resources by 2020. While the Abengoa contract will help PG&E meet that requirement, the commission’s acknowledgment of its high cost is likely to deepen a debate about the competitiveness of solar-thermal technology versus conventional solar panels, which have fallen in cost due to global oversupply.

Abengoa’s technology uses parabolic mirrors to focus sunlight on tubes containing a heat transfer fluid, which is used to produce steam that drives a turbine to generate electricity. The Mojave project is expected to enter operation in 2014.

“For the amount we’re spending on this we could get 500 megawatts of power,” Joe Como, director of the commmission’s Division of Ratepayer Advocates, said today in a telephone interview. “This is not a new technology, it’s a very old technology, and the indications are that the prices are never going to come down on it.”

Abengoa initially submitted the contract for approval in October 2009. “We’re told that the hard hats are on and the bulldozers are ready to roll,” Commissioner Mark Ferron said in the statement. “Therefore, we can have high confidence that this project will get built,” he said.

To contact the reporter on this story: Andrew Herndon in San Francisco at aherndon2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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