Sempra Generation aims to build at least 300 megawatts of solar power projects on land it owns in Arizona, and it plans to start construction next year, said CEO Michael Allman on Wednesday.
The power producer plans to replicate what it has done in Nevada, where it has built a 10-megawatt solar power plant next to its existing 480-megawatt natural-gas power plant. San Diego, Calif.-based Sempra is expanding the solar power project in Nevada by adding another 48 megawatts (see First Solar to Build 48MW Power Plant for Sempra).
Speaking at the Dow Jones Alternative Energy Innovation conference near San Francisco, Allman said the company plans to build more than 300 megawatts worth of solar projects on 4,000-plus acres it owns near Phoenix, Ariz., where it also already runs a 1.25-gigawatt natural gas power plant. Building the solar power farm next to the conventional power plant helps to reduce costs by being close to existing transmission lines.
The Arizona solar plan, called Mesquite Solar, would be built over many years. Allman declined to say how much money the company plans to invest in the plan, or the size of the first project. Sempra develops, owns and operates power plants and sells electricity to utilities in Nevada, California and Arizona.
Arizona is becoming more aggressive about solar technologies. It offers a $3 per watt credit, nearly twice as high as California's. Baseline power in the state, however, is comparatively cheap so some of the advantage is eroded. Nonetheless, some power providers want to produce power in Arizona to sell to California.
Sempra has leaped into the solar power development business with a vengeance. The 10-megawatt project in Nevada was the first in solar for the company, which started selling electricity from the plant to utility Pacific Gas and Electric Co. in Northern California in January this year (see PG&E to Get Solar Power for the First Time).
Sempra is part of Sempra Energy (NYSE: SRE), which also owns San Diego Gas & Electric, a utility in Southern California. Allman said his company has the financial muscle to develop solar energy, unlike other companies that have had to delay or ditch projects altogether.
"There is a tempering of optimism in the business," Allman said. "There was a time when people had stars in their eyes."
Sempra would open to buy or co-develop projects from developers who can't complete them on their own, Allman said. The company didn't bid for the gigawatts worth of unfinished projects from OptiSolar, however. OptiSolar ended up selling those projects, located mostly in western United States, to First Solar for about $400 million earlier this year (see First Solar Buys OptiSolar's Power Projects).
Sempra is fond of First Solar, which has been making solar panels for years and jumped into the power plant building business in earnest over the past year. First Solar built the 10-megawatt project in Nevada, and snagged the deal to add 48 megawatts next to it.
The company picked First Solar because First Solar could supply panels cheaper than others, Allman said. Tempe, Ariz.-based First Solar makes cadmium-telluride panels and is rapidly expanding its factories in the United States and Malaysia to reduce costs.
"The electricity we are getting out of the 10-megawatt is the lowest cost solar energy ever generated from anywhere in the world. I've had that statement out there for a while, and no one has challenged me," Allman said, who declined to disclose the cost.
Given that delivering cheap solar electricity is key to winning utility contracts, Sempra could well pick First Solar again for its Mesquite Solar project. Allman said no decision has been made, and he would consider using other types of solar panels, including the more expensive crystalline silicon variety.
Crystalline silicon panels in general cost more to make because silicon is expensive, but they also can convert sunlight into electricity at higher rates than competing photovoltaic technologies. But silicon prices are falling, and that could make crystalline silicon panels a more attractive option, he added.
Sempra has also evaluated solar thermal power technologies, which use a field of mirrors to concentrate the sunlight to produce heat for electricity generation. The company has found that using solar panels is the cheaper option, Allman said. He noted that some of the solar-thermal power technologies, such as the use of a central tower for harvesting the heat and generating steam, have yet to be proven commercially.
Building solar power plants require lots of land. The general rule is to set aside 8 acres for building every megawatt of generation capacity, Allman said. The company bought those 4,000-plus acres in Arizona for the underground water rights many years ago, however, because its natural gas power plant uses water-cooling, Allman said.