Is Bureaucracy Killing Solar?

The most attractive word in solar right now just might be "Foreclosed."

Mojave Sun Power is in the midst of preparing a utility-scale solar thermal plant that will cover 6,000 acres in Arizona. The project, however, won't sit on Bureau of Land Management property. Instead, the land mostly comes from a residential property development that never got off the ground.

"We want to avoid BLM," said Rob Morse, the finance director for Mojave.

Morse further added that much of the power produced by the plant won't stay in Arizona. It will go to California or Nevada. Arizona has streamlined its approval process, which became another factor in locating the project there. 

An added bonus: the residential property development came with water rights that will likely exceed the needs of the solar thermal plant. Oh, and the transmission capacity was earlier upgraded.

Mojave's story is an increasingly common one in solar. Although Secretary of the Interior Ken Salazar and the Department of Energy have promised to streamline federal land use policies, environmental regulations and bureaucratic inertia tip the balance in favor of going after private land and circumventing the feds whenever possible. The regulatory tangle in some states, perhaps most notably in California, is also hampering the industry. (Texas, though, has its issues too, because the structure of the incentives can make it more difficult to obtain large offload contracts.)

"Permitting has become one of our top priorities here. It is one of the biggest barriers in the solar market right now," said Hannah Muller with the DOE Solar America Cities Initiative, which puts together programs for municipalities to promote solar. "PV modules are dropping in price quickly but the soft costs aren't dropping as fast."

Citing a Lawrence Berkeley Laboratory study, Muller said that soft costs like paperwork consume 30 percent of the budget for commercial projects and 40 percent of residential projects. One problem is that local governments haven't evolved as fast as the solar industry. The Solar America initiative will hold a symposium to discuss progress in a number of pilots for streamlining financing and paperwork next month.

 Morse and others will discuss the topic at Greentech Media's 2010 Solar Summit next week.

Exhibit A for how regulatory headaches can emerge is BrightSource Energy's Ivanpah project. The solar thermal company has had to scale the California plant down to 392 megawatts from 440 megawatts because of wildlife concerns. A proposal from U.S. Senator Dianne Feinstein to protect one million acres of the Mojave Desert last year caused wind and solar developers to roll up plans to build in the region.

Solar thermal developer Tessera Solar North America has already contracted to build plants in California but will likely shift to building future power plants for California in Arizona because of the time and expense involved in building in the Golden State. In other words, California will get green power but not as many green jobs as it might otherwise.

"Permitting, transmission and mitigation" are the three big issues facing developers, says Felicia Bellows, vice president of development at Tessera. Mitigation costs, i.e., payments to replace land consumed by the plant, are particularly high in California because of fish and game regulations and other set-asides. Tessera is building on BLM land, but seeks out privately owned land because it can be cheaper after all factors are considered.

Property owners, naturally, like this trend. Last year, Vermaland, an Arizona developer, auctioned off 400 acres for $2.6 million to solar developers.

Photovoltaic developers face similar issues. "More than half of the money in personnel costs are for paperwork," says Barry Cinnamon, CEO of Akeena Solar. The introduction of PACE programs to pay for energy retrofits has even made the waters more murky because of the nebulous status of solar in some of these programs.

It should be an interesting discussion.