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Developer Won't Build Controversial Solar Plant Without Tax Incentives

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Artist's rendition, Palen Solar project (a couple redesigns ago) | Image: California Energy Commission

The controversial Palen Solar Electric Generating System, which was put on hold in November, will stay on hold unless a federal tax credit for building solar power plants is extended.

That's according to Santiago Seage, chief executive of the Spanish-owned Abengoa Solar, which owns the embattled project. Seage told the trade journal Recharge News that without an extension of the federal Investment Tax Credit for solar plants, his company won't have the security it needs to invest in building the project.

Seage made the remarks at the ribbon-cutting of his company's 280-megawatt Mojave Solar plant near Hinkley.

The looming expiration of the 30 percent investment tax credit, set to run out at the end of 2016, is one of the reasons Abengoa and its then-partner BrightSource Energy pulled the ever-changing Palen project off the table in November. Delay fueled by criticism of the plant's likely effect on wildlife, especially migrating birds, as well as the impact on local cultural resources, had caused the developers to miss one funding deadline after another.

By November 2014, it was clear that getting the plant built and operating in time to meet the December 31, 2016 deadline for the tax credit was unlikely. BrightSource and Abengoa withdrew the plant from consideration, and Abengoa agreed that it would buy out BrightSource's interest in the project.

BrightSource has staked its corporate fate on the success of its proprietary solar power tower technology, which uses thousands of independently targetable mirrors to aim solar energy at receivers atop power towers. Its former partner in Palen, though, has no such restriction: Abengoa owns and operates plants using the competing parabolic trough solar thermal technology (as in the recently dedicated Mojave Solar project), as well as the increasingly dominant photovoltaic panels.

When BrightSource pulled out of Palen in November, many observers (Rewire included) suggested that Abengoa might switch strategies and redesign Palen as a parabolic trough plant. After all, that's the design the California Energy Commission originally approved for the plant in 2010, back before the original developer Solar Millennium went belly-up and sold out to BrightSource.

But if you take Seage at his word, Abengoa remains committed to power tower technology for Palen, as well as other projects throughout the desert Southwest. According to Desert Sun reporter Sammy Roth, Seage expects that most of Abengoa's new concentrating solar projects will use power tower technology due to the claimed ease of incorporating power storage into plants of that design.

"We expect that going forward, most if not all concentrating solar plants in the Southwest will include storage," Seage told Roth.

The likelihood that Congress will vote to extend the Investment Tax Credit, or to alter its language so that projects need merely break ground by the deadline rather than generating power, isn't clear in the wake of the Republican capture of both houses. Unlike wind power, whose growth in red states means a significant Republican pro-wind constituency, solar power doesn't seem to have much of a fan base among conservatives.

That's a significant obstacle for utility-scale solar thermal companies, which need all the financial help they can get in order to compete with increasingly cheap photovoltaic panels.

If Congress doesn't act, the tax credit will decline to 10 percent on January 1 2017 for utility-scale solar projects, and to zero percent for rooftop solar systems. Though prospective owners of those rooftop solar systems may wince, the demise of the tax credit is less likely to hurt rooftop solar as an industry that it is utility-scale solar. That's because bigger plants have to be competitive with the wholesale price of energy getting sold into the grid, while rooftop systems need only compete with the significantly higher retail cost of that energy as reflected in your electric bill.

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