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.
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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.
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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.
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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.
Full story here
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.
“PG&E asked the bankruptcy court to allow it to potentially cancel up to $42 billion in contracts”.
Oh boy, beautiful. Wind and solar are being “Enroned”. Contracts get busted and companies go broke. Doubt it? Go back and Google the 2000 era Enron postings.
Strange, though the biggest oil and gas producer on US on land (as opposed to the Gulf producers) is EOG which is some part of former Enron. EOG is also the leading innovator in fracking of shales, developing the major improvements that others are following, getting better recoveries per well …
Because of this, there are over 50,000 wells from a few years back that were thought to have been depleted in an economic sense that can be cheaply re-entered, refracked and produce almost as much hydrocarbons as they did first time around!
Most people have no idea of the magnitude of this resource and its not just in US and Canada. Romania, as an example, is underlain entirely by hydrocarbon- bearing shales, Argentina, Australia – basically all oil and gas producing regions, and a lot more that never produced oil and gas, have such resources. I recommend you get EOG as a partner around the world, though. China and a number of others failed miserably at it.
EOG is the former (maybe still is) Enron Oil and Gas.
If they don’t have the money, and the government will not bail them out then we are left with a group of outsiders fighting for the money they are owed. A judge will have to sort it all out. Everybody will not get what they are owed because the pie is too small.
They just need a little Enron accounting. Wonder who the state will tap into next for an endless stream of money for worthless ( and wrong) projects? Wonder if California will look like Venezuela in a few years? I’m worried about where I’m living in Colorado. The looney tunes are moving here. Life was so good there that they felt it necessary to impose their ill begotten ideas on others. You can tolerate heat, cold you can not, you will die. While the temp maybe mild sometimes, as in 40’s and 50’s F, you still need heat. It gets dark out night. Is it’s governments plan to reduce us to 3rd world status just so some idiot politician can claim they are the leader against a non existent problem. ??
How long do you think it will take California to recover once all the crap hits the fan? Oh yea, don’t repair any of the dams, you have AGW’s assurance that it will never rain again in California. Or the snow pack will dwindle away to nothing.
NextEra Energy Inc., the largest U.S. renewable-energy provider, indicated Friday that a bankruptcy could chill investments in wind and solar in the state.
Yes, it “could”, and the sun “could” come up tomorrow. Same chance. Love it!
“NextEra Energy Inc., the largest U.S. renewable-energy government teat sucker, indicated Friday that a bankruptcy could chill exercises in mandate and subsidy farming via wind and solar in the state.”
There, fixed it for ’em.
“Clean energy advocates also have concerns about the fate of PG&E programs to build electric car charging stations,”
What are these people? Idiots?
Probably 95% of the power used by EVs comes from the home of the owner, not a charging public charging station.. And level 2 (7.5 KW) public charging stations no longer make any sense, when most EVs these days can recharge at 75KW to 350KW, making level 2 chargers obsolete except in the home. Tesla builds their own public fast level 3 DC charging stations,so their cars are taken care of.
VW Group created Electrify America to install DC fast chargers using CCS protocol, which is the
de facto Western standard. AndPorsche is installing at all 200 dealerships in the U.S. and Shell Oil andExxon and Mobil Oil are installing CCS fast Level 3 chargers at their gas stations. EVgo is also installing Level 3 CCS chargerss. The free market is moving fast to ensure that electric cars have fast public chargers. There is no need for utilities to get involved – they do not have the instalation sites (gas stations) , Walmarts, Targets, etc nor the technical capabilities required.
However you forget one thing: the electricity doesn’t grow naturally at the charging point. It has to come from somewhere.
Calizuela is unsustainable after all.
“a massive, 550-megawatt project in the Carrizo Plain of San Luis Obispo County, ”
Actually a 550 MW (nameplate) capacity for solar panel farms can only average
roughly 125MW of output. A small modular molten salt reactor can produce
360MW of output 24/7 and load follow to boot (no need for peak load generators)
It’s geographic footprint is tiny comparedto the solar farm and it can be located
virtually anywhere.
Every crazy subsidy eventually crashes into the wall of economic reality. Uneconomic political fantasies go bankrupt. Often the only way to dump these albatrosses is to go bankrupt. Paying homeowners retail prices for intermittent electricity generation and then paying to dump the surplus electricity to neighboring states is the ultimate economic insanity. This is a disaster for California and Germany. Parts of my state of Texas are in for the same harsh lesson. Politicians are horrible at making business decisions, this is why they should never be allowed to run businesses. Don’t get me started on politicians dictating the investments pension fund managers can make.
From a public policy perspective, I’m not sure which is preferable — that voters and consumers remain stuck with the high costs of large, uneconomical investments made in renewable energy, or that investors in renewable energy companies get stuck.
This is only the tip of the “Green Energy” iceberg.
Scientists and engineers have been reporting the problems with intermittent wind and solar for years. There has never been a proper engineering feasibility study, let alone a cost-benefit analysis.
Please read this article and the comments following:
https://blog.ospe.on.ca/featured/ontario-wasted-more-than-1-billion-worth-of-clean-energy-in-2016-enough-to-power-760000-homes/
This is from the the Ontario Society of Professional Engineers (OSPE), those tasked with generation, distribution and billing of electricity in Ontario.
The San Francisco Board Of Supervisors is asking the state to shield rate payers from absorbing the costs. Also asked that the city to size PG&E assets.
Of course they did. Most rate payers are eligible voters. The scythe of failure cuts all. Not just the guilty but also the passive and innocent.
The State of California could step in and say, “The utility is to blame for starting the fires but the state government is to blame for the costs being so extensive. If our policies weren’t so insipid, the cost of the fires would have been much, much less. Therefore, we have agreed that the State of California will cover ___% of the liability.
Or, they can shove the costs of the fire onto PG&E shareholders until they’re wiped out, with some of the burden shared by these renewables companies, and with the rest of the cost being absorbed by electric ratepayers. Which is what they’re going to do.
“Therefore, we have agreed that the State of California will cover ___% of the liability. “
Have you really thought about that?
The Ambulance Chasers of course would love to have the biggest pocketbook of all to fleece… the taxpayers. The more blood money to get, the more sharks will come to circle the dead carcass for a piece of the action.
PG&E (PCG:NYSE) has already lost 75% since just before the Camp Fire. It has lost 83% of its value since August 2017 — 18 months ago. PGE has not been paying dividends since Sept 2017 either, and with no dividends likely now for years. Today at $13/sh, it hasn’t been at that level since 2002 during ENRON’s meltdown. Dividend incomes is the primary reason most investors buy and hold utility stocks in a portfolio. I’m pretty sure most investors-share holders have been wiped-out considering their purchase price of their PCG positions, and no dividend income for 18 months.
Can any privately-owned utility survive in California over the next twenty to thirty years without being fully immunized from the kinds of lawsuits that normally arise from conducting power marketing and distribution operations inside a large geographically diverse area; without being fully immunized and indemnified against the costs of environmental damage caused by accelerated wind and solar development projects; and without having a guaranteed rate of return on all new money invested in wind, solar, and energy storage facilities? (I think not.)
You know the saying, “It takes a big man to admit when he was wrong.”, which is why California, and especially the Governor, won’t admit they were at fault.
Anthony wrote:
“It will spur revolts, and mass exodus from California if that happens.”
Change “if” to “when.” The federal judge’s hands are tied by bankruptcy law in how he can respond to the the creditor filings.
But 5X rates increases are quite unlikely. But 2X is certainly possible. Beyond that politics would take over to somehow shift the burden (hide it) to all Californians via more energy taxes.
And any mass exodus will be tempered by the fact that many will not be able to relocate until they sell their home. Of course, then it would be a 2008/2009 style residential real estate value implosion in California. If that happens, many folks with deeply underwater mortgages would hand the house keys over to their mortgage holder and simply walk away to another state.
Joel O’Bryan-
That is exactly what happened on a smaller scale in Titusville, Florida, (a town near the Kennedy Space Center), after we landed a man on the moon in 1969. With the mission accomplished, NASA essentially shut down. People who were making good money until then, had to just walked away from their homes. I know, because my parents bought one of those homes for essentially what was left on the mortgage.
It’s a small world. I got to paint some of the interiors of some of those houses when I was trying to make money to go to school. They couldn’t build them fast enough.
A detailed economical analysis of the situation in California by Mrs. Occasio-Cortez could prove very entertaining.
Any reporter to take the chance ?
Oh my Flight Level! Need to charge you for a new keyboard for my PC. It was only 14 dollars, but since I laughed so hard I forgive your debt!
Thanks
Macusn
You’re both silly. Obviously O-C would tell you that California’s problem is Not Enough Socialism. Also, that if California had already moved to 100% Renewables then the Forest Fires would never have been started, because they were the product of CO2 induced Climate Crises Change Cancer whatever.
Also Green energy won’t start fires, because that would produce CO2. That’s just logical.
○¿○
Now if Municipalities can sue Exxon for what they “knew” about Catastrophic Anthropogenic Global Warming (despite it being away somewhere in a future that keeps expanding and becoming more dubious by the year), why in heck can there not be a class action by ratepayers against individuals like Jerry Brownout, Al Gore, Steyer, Rockefeller Bros foundation, etc… and environmental orgs, academia …who have injured the innocent consumer and taxpayer. Comparatively, it wouldn’t amount to much per capita but to put these bozos into bankruptcy would be a fine insurance policy for any similar adventures in the future. There’s something we could do for our great grandchildren!
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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.”
__________________________________________________
The same justice system that pressed PG&E into the current catastrophic situation
now is asked to acknowledge and help to clear that even situation.
Furthermore, no one in Kalifornia will be allowed to fart after 2035 without a state hefty fine from CARB.
California messed up energy deregulation almost two decades ago and prevented PG&E from recovering enormous cost increases, driving PG&E into bankruptcy. Following that the PUC kept such tight control over what PG&E could charge that many actions now demanded of PG&E could not have been taken when they could have helped prevent catastrophe. California and federal, county, and cities contributed to catastrophe through zoning, forest management, and discouraging urban home building, thereby driving up housing costs in the cities and forcing development in forested areas. About political leadership in California Pogo says: “We have met the enemy, and it is us.”
One great way to cut costs is to get rid of all renewable contracts and abrogate all state laws demanding they go to renewables. If the state does not like it, they have to take of the company and pay for their own laws.
Not, we hope, entirely off-topic – does anyone have data showing sales of diesel home generators and their correlation or otherwise with the adoption of grid-threatening energy policies – e.g. Australia or California ?
California border states need a wall to keep out the liberal rats who will try to jump ship.
Call Trump.
“It will spur revolts, and mass exodus from California if that happens.”
Which is generally what happens when the voters put socialists in charge. See Venezuela for the most recent example of “revolts, and mass exodus”.
The general public has absolutely no idea just how big a clusterf*ck the PG&E bankruptcy is (yet).
All those high-cost PPAs are going to be rejected. They are executory contracts and the federal Bankruptcy Code allows just that. There are fundamental conflicts between delusional California state law and the Bankruptcy Code that will end up being litigated— that will be interesting because there aren’t legal precedents. Nevertheless, I doubt that state law will be adjudicated to preempt Federal law.
It wouldn’t surprise me if it takes five years or more for PG&E to emerge from bankruptcy.
No one in their right mind will expose capital to the risk of (constructive) expropriation by the California collectivists, climate nutjobs, corrupt politicians, believers in perpetual motion machines and zanies. It’ll be a cold day in hell before I ever put a dime anywhere near a California public utility.
This PG&E bankruptcy is the direct result of the “CO2 Derangement Syndrome” as discussed on WUWT last week. https://wattsupwiththat.com/2019/01/23/the-co2-derangement-syndrome-a-historical-overview/
Unfortunately Governor Moonbeam is not the only prominent Democrat with a terminal affliction of this sort-
Al Gore ,President Clinton, Bernie Sanders, Octavio- Cortez, Nancy Pelosi (we-must-face-the-existential-threat-of-our-time-the-climate-crisis) de Blasio (Climate change is a dagger aimed at the heart of New York City) are obvious examples. Had Trump not been elected the USA as a whole would by now be well on the path to the same disaster.
Will any body question whether the large flows of intermittent solar energy over the grid from remote solar farms contribute to transmission line sag and voltage problems?