United States

United States

California's new investment plan

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California's newly formed Power Authority has approved a plan to facilitate financing of about 475 MW of firm renewables generation, about 1275 MW in nameplate capacity, by 2006. With about 3500 MW of other generating resources also included in the plan, the authority expects the cost to hit $4 billion. And when transaction costs are included, it could push its potential spending up against its $5 billion financing authority allowed by the state. However, the cost is still less than most Californians pay for electricity.

One of the weaknesses of the investment plan is the authority's requirement that any project it seeks to finance must have a "secure revenue stream to repay the amount borrowed with interest," the plan says. Otherwise it can't approve it. As the American Wind Energy Association points out, that means the authority cannot seek bond financing until it has well-defined projects. The authority currently has about 2400 MW of letters of intent from renewable energy suppliers, all in various stages of development. The authority, which is concentrating on ensuring the state maintains a 15% reserve margin in electricity supplies, predicts it will fall 5.9%, or about 3500 MW, short in 2006 and more in later years. It is choosing a "clean energy" strategy to fill that gap. The authority expects regulatory policies, such as a renewables portfolio standard being considered in California, to force private sector involvement. That bill would require utilities to buy 20% of their electricity from renewables generation by 2010.

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