A little-known $15 billion deal between PG&E and the Department of Energy is raising concerns for California residents. The agreement, which will expand hydropower, also includes shutting down the Ivanpah solar plant, which has been providing energy to 140,000 homes.
Without this reliable source of clean energy, California’s already overburdened power grid will struggle, leading to higher energy costs and more frequent blackouts. Critics argue that while PG&E benefits financially, everyday Californians will be left paying the price with increased bills and an even less reliable power system.
Questions are also being raised about possible conflicts of interest with key players in the deal, making it even more controversial. We spoke with one of the main investors of the $2.2 billion Ivanpah plant to learn more.
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In the final days of the Biden administration, a major energy deal quietly unfolded that could have long-lasting consequences for California’s power grid and taxpayers. A $15 billion loan guarantee from the Department of Energy (DOE) to Pacific Gas & Electric (PG&E) for hydropower expansion has raised concerns about energy reliability, cost, and who ultimately pays the price. This deal, which has been largely unreported, suggests that the Biden administration orchestrated a backroom agreement that benefits PG&E while undermining California’s already fragile grid.
The heart of the issue lies in PG&E’s agreement to buy out Ivanpah’s power purchase agreement (PPA), which will result in the shutdown of the Ivanpah solar plant, a major renewable energy facility. With Ivanpah’s closure, the 140,000 homes it powers will have to rely on the already overburdened grid, especially during peak demand hours. This will further strain the grid at times when energy consumption is highest, leading to more frequent blackouts and an even less reliable power system for California.
Related: what we can learn from Ivanpah’s failure
What’s more concerning is that the energy PG&E will lose from Ivanpah, which can be one of the most affordable sources of power during peak demand, will need to be replaced by energy purchased from the market. However, PG&E’s market purchases are expected to come at a significantly higher cost. These increased costs are likely to be passed on to ratepayers, ultimately negating any supposed savings from the deal and potentially causing long-term rate increases for California consumers. The decision to shut down Ivanpah not only jeopardizes energy reliability but also threatens to undermine the state’s clean energy transition.
A better alternative would have been for the DOE to restructure Ivanpah’s loan, allowing the facility to remain operational while investing in energy storage technologies to help meet peak demand. “Ivanpah produces power for 140,000 homes, and has been a reliable source of energy for California residents for over a decade,” said Neal Lee, Vice President of CMB, one of the lead investors in the Ivanpah project to Green Prophet.
Related: Why the Collapse of a $2.2 Billion Solar Dream Threatens the Future of Renewable Energy
“We applaud the Trump Administration’s efforts to unleash the full power of American energy, and rectify the bad deals the previous administration struck that will take energy off the grid. We look forward to working with Secretary Wright to help implement his all-of-the-above energy strategy, and are excited to continue our work with the Department to find more ways to provide affordable, reliable energy during high-demand hours.
“Continued innovation in this plant will expand its capacity and its lifespan, and ensure it powers homes in a state that needs it long into the future,” he added.
Adding to the complexity of this story is the recent hiring of former Energy Secretary Jennifer Granholm to the board of Southern California Edison (SCE), which receives energy from the Ivanpah plant, says an undisclosed source close to the deal.
“We’re thrilled she is joining our boards, and we look forward to the guidance she will provide based on her understanding of the technical, political and economic forces shaping our industry today.” said Pedro J. Pizarro, president and CEO of Edison International, in a statement.
This move raises questions about possible conflicts of interest, given Granholm’s involvement in shaping energy policy during her tenure as Secretary, alludes an advisor working with Lee. “Her new role with SCE has prompted concerns that her influence may have played a role in orchestrating deals like the one between PG&E and the DOE, potentially prioritizing the interests of private energy companies over those of California’s residents,” the source says.
At the heart of this issue is the fact that, while PG&E stands to benefit from the loan guarantee and the Ivanpah deal, it is California’s taxpayers and residents who are left to bear the costs. The shutdown of Ivanpah will weaken the state’s energy infrastructure, could increase the likelihood of blackouts, and may ultimately raise electricity prices. PG&E is under no obligation to replace Ivanpah’s energy at a cost-effective rate, meaning ratepayers are likely to feel the financial strain for years to come. The deal appears to be a short-term gain for PG&E, but at the expense of long-term energy reliability and affordability for California residents, says our source.
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CMB holds the equity position in Solar Partners that was originally owned by BrightSource (now Kelvin Energy). Solar Partners is a larger group that includes NRG, Google, and Kelvin, all of which own and operate the Ivanpah power plant. CMB is also one of the primary investors in Kelvin Energy, which holds a 13% stake in Solar Partners. In short, CMB is involved both in owning part of the Ivanpah power plant through Solar Partners and as a major investor in Kelvin Energy.
