Are California’s solar and wind projects at risk in PG&E bankruptcy?
PG&E has asked a bankruptcy judge for the authority to nullify billions of dollars in contracts with solar and wind farms
By PAUL ROGERS | Bay Area News Group
California has the most far-reaching renewable energy laws in United States.
But with the bankruptcy filing Tuesday by the state’s biggest electric utility, PG&E, major questions are arising about whether California will be able to meet its ambitious targets for solar, wind and other types of green electricity in the years ahead.
In stacks of court documents, PG&E asked the bankruptcy court to allow it to potentially cancel up to $42 billion in contracts that it signed over the past 15 years to buy electricity from other companies. PG&E has signed 387 such agreements, it said in court papers, and the majority, or 298, commit PG&E to purchasing solar, wind or other renewable energy to meet California’s environmental goals.
Many of those deals, which are called “power purchase agreements,” are for 15- to 20-year periods. They were signed years ago when solar, wind and other renewable electricity was more expensive than it is today. The revenue they delivered help finance construction of large solar and wind farms across the state.
But PG&E is locked in to billions of dollars of high priced-contracts now, and facing staggering debts from wildfires sparked by its power lines. It also sees declining demand for its electricity as more Californians install residential solar systems and buy power from local community non-profits. On Tuesday, PG&E has asked the bankruptcy court to rule that federal regulators should not be allowed to step in and require that its contracts be left intact.
Already, however, PG&E’s bankruptcy is making big waves across the renewable energy industry.
Three weeks ago, S&P Global Ratings cut the credit rating of Berkshire Hathaway’s Topaz Solar Farm, a massive, 550-megawatt project in the Carrizo Plain of San Luis Obispo County, to junk status. The ratings company noted that the plant, one of the world’s largest solar facilities, relies on PG&E for all of its revenue.
Last year, citing the need to reduce further greenhouse gas emissions and air pollution, former Gov. Jerry Brown signed a new law requiring 60 percent renewable electricity by 2030, with the other 40 percent by 2045 coming from “carbon free” sources like hydroelectric dams, nuclear power or natural gas plants that capture and store their emissions.
White and other renewable energy advocates worry that if PG&E walks away from many of its old renewable power contracts, that could put solar and renewable energy companies in a financial bind, even potentially bankrupting some.
“The contracts represent the base of California’s energy transition and how we are going to minimize climate change,” White said. “We’re worried that our destiny is now largely in the hands of the bankruptcy court judge.”
Clean energy advocates also have concerns about the fate of PG&E programs to build electric car charging stations, provide rebates for energy-efficient homes and other environmental measures.
But some experts say bankruptcy, while disruptive, may not wreck California’s green energy goals.
If the solar and wind contracts are broken, PG&E will have to renegotiate them at a lower cost, and that could help keep prices lower for ratepayers, said Shon Hiatt, an assistant professor of business administration at the University of Southern California.
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My biggest question: will PG&E also nullify and renegotiate when it comes to the millions of homes and businesses that have invested in solar power?
I invested in solar power for my home, only as a hedge against future power increases. I got compensated for the electricity I sent into the grid at the market wholesale rate, just like any other generation entity. But if PG&E can be allowed to break contracts with major suppliers, who knows what the compensation rate will be for small fish like homeowners if they are able to break those contracts too?
Even if they don’t do that, with the threat of disaster/bankruptcy recovery surcharges being added to power bills, possibly even 5x greater than what they pay now, ratepayers may find that even with solar, they’ll be faced with life-changing catastrophic bills.
It will spur revolts, and mass exodus from California if that happens.
It’s all madness.