Houston solar deal in limbo

NRG Energy and the City of Houston are at a standstill in their plans to build a new 10-megawatt solar plant, a scenario that may lead the city to consider another partner for the project.
The $40 milliion project, announced in September, would have NRG place an array of photovoltaic cells on a 70-acre site next to the T.H. Wharton power plant near Texas 249 and North Beltway 8. The city would commit to buy power from the project – which could supply as much as 1.5 percent of the electricity the government body uses — for the next 25 years.
It’s the how the city commits to those 25 years that’s at the heart of the problem, however.
A typical power purchase agreement says Party A will pay Party B a particular dollar amount or rate over so-many years. That gives Party B the confidence to spend the money on that power generating capacity, or in some cases provides Party B with collateral it can use to get bank financing.
The city generally doesn’t commit future taxpayer funds without some sort of oversight and approval, however, said spokesman Frank Michel. Future elected leaders don’t necessarily like being forced to pay for past administration’s decision should they go bad, so the city usually has a clause in long-term agreements that says they have to be reapproved on a year-by-year basis.
Michel said he doesn’t believe state law prohibits the city from making long-term commitments, “But it’s a precedent the mayor does not want to set.”
But NRG isn’t so comfortable with that uncertainty.
“NRG is unable to finance this project without the certainty of future payments under a power purchase agreement,” said NRG spokesman David Knox in an e-mail. In other words (not Knox’s) no company wants to build a $40 million project with just a single-year’s payment guaranteed.
Both sides say they want to do the project with each other, but this disagreement appears to be pretty fundamental to both sides.
So what could happen next? The project came about as part of a competitive bidding process, where companies responded to a request for proposals. The city could go to the firm that took second in the bidding to see if they will do a deal. I only know of one other firm that bid on the project, Houston-based Standard Renewable Energy, but that’s not to say there weren’t others. SRE hasn’t (yet) responded to an e-mail I sent about the issue, however.
Whoever the other bidders are it’s unlikely they have the same advantage NRG had of vacant land right next to a major grid interconnect. The city may still be able to use land it originally aside for the project, a vacant wooded parcel next to Sunnyside Park.

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