Business

National Solar CEO Sees 'Revolution in the Marketplace'

By: Kenric Ward | Posted: September 28, 2011 3:55 AM
National Solar Power

Can a solar-power company make a go of it in Florida without burning up Solyndra-style?

National Solar Power CEO James Scrivener, in an exclusive interview with Sunshine State News, said, "Two years ago, people were laughing at our business model. Now they're looking to invest. We see this as a revolution in the marketplace."

Long before Solyndra Corp's financial collapse -- and the "green" energy company's attendant default on a $535 million federal loan guarantee -- renewable-energy ventures have struggled Florida.

That's at least partly because the state's "avoided-cost" formula for purchasing alternative power is tied to fossil-fuel costs and does not factor in start-up or construction expenses.

“You can’t make a project profitable by selling electricity at avoided cost. That is the dirty little secret that everybody in the industry knows," says Mike Antheil, head of the Florida Alliance for Renewable Energy.

But even at a contracted rate of 4-to-5 cents per kilowatt hour, Scrivener says National Solar's five-step strategy will turn profits at its 4,000-acre complex planned for Gadsden County in North Florida.

Step 1 starts with "a very low-cost construction and very simple technology," Scrivener said. He estimates construction of the Gadsden solar farm -- the largest in the Southeastern United States -- will run $3 per watt, less than half the cost of Florida Power & Light's Arcadia project.

Step 2 involves long-term, low-interest debt facilitated through the company's AAA credit rating.

Step 3 leverages tax credits marketed through commercial bank partnerships. These "tax-equity syndicators" will help to monetize the solar project.

Step 4 gathers a mix of local tax abatements with expedited permitting, state assistance for power-plant siting and standard economic incentives available for job creation under Enterprise Florida.

Finally, National Solar expects to tack on revenue by selling carbon credits on the global market, netting as much as 3 cents per kilowatt hour on top of the 4-to-5 cents the company receives through contracts.

"On 25-year annual cash flows, we will achieve a double-digit return on investment," Scrivener forecasts. "It depends on how you structure your debt, but I'm making money in year one as an owner."

Antheil remains skeptical.

“If they are somehow able to make the numbers work at avoided cost, more power to them. I have never seen a financial model that comes even close to being able to build a solar farm by selling their electricity at the avoided cost that Florida’s utilities claim," he said.

Antheil related that the Desoto Solar Farm, built by FPL, was billed to its customers at "about five times the avoided-cost price."

Estimating that an average facility can only become profitable by selling its electricity at about three times the avoided-cost price, Antheil said:

"The utilities, the legislators and the Public Service Commission all know that avoided cost is a cloak that utilities hide behind so they don’t have to buy electricity from anyone and can produce it all themselves at the expense of their ratepayers."

Suzanne Grant, a spokeswoman for Progress Energy, characterized its contractual agreements with National Solar as "nonbinding on timing or quantity."

Scrivener maintains that the sky is the limit when it comes to solar.

Refuting the old joke about a loss-leading company "making it up on volume," the CEO figures National Solar is on the right side of history, and the price curve.

"We believe the value of energy will increase," he says.

The 18-month-old Melbourne-based company has signed nine power contracts with Progress Energy. Gadsden is scheduled to be the first of a series of solar farms to be sited in Florida, with another to be announced soon in Hardee County.

Along with its agreement with Progress Energy, National Solar has executed power supply pacts for more than 3,000 megawatts of solar generation in the Southeast.

The company anticipates much of the power will be used for "peak shaving," energy production that occurs during the summer months, when market rates are highest.

Once fully constructed, the 400-megawatt Gadsden project, which National Solar pegs as a $1.5 billion economic investment, will generate enough renewable energy to power roughly 32,000 homes.

Consisting of 20 solar farms built on 200-acre sites, the complex will provide 180 operations jobs at salaries averaging $40,000 annually.

Contact Kenric Ward at kward@sunshinestatenews.com or at (772) 801-5341.


Comments (6)

boom
4:04PM OCT 18TH 2011
Vin
This is a spectacular article that I have really enjoyed. Hopefully I can learn more from your valuable experience. Thanks a lot for sharing this and please keep on posting more.
Scott
3:54PM OCT 7TH 2011
Just let the energy entrepeneaurs sell electricity at retail. Suddenly investers will come out of the woodwork to fund these enterpeneaurs who will build the best distributed/renewable/ energy supply system that the latest technology can provide. If you compare energy to telecom we are in 1968 with regard to regulation and 1995 with regard to technology. Turn us loose and we WILL put a lot of people to work with NO taxpayer or ratepayer $$$$.
Groscoe
12:05PM SEP 28TH 2011
Solar cannot compete with coal or natural gas.......This country was founded on cheap power costs.....this is the wrong direction unless you also think it is good we have the highest corporate tax rates.......
LDouglas
7:23PM SEP 28TH 2011
At face value, perhaps. And also perhaps at this point in time. But solar will get cheaper over time- as finite resources, you can't say that about coal or natural gas.

Another nice thing about solar over coal and natural gas, in a free market economy, we don't have to worry about it being exported to the country who has the money to pay top dollar for it.
shammoo
10:20AM SEP 28TH 2011
Solar only works if the tax payers supply most of the juice. Step 3 above is the real motive for the project, tax credits. Another leg of support is selling carbon credits since it requires a long-term buy in on global warming. Solar is just another way for people to take your hard earned money.
LDouglas
7:19AM SEP 28TH 2011
Sounds like we need to do something about the "avoided-cost" formula! Solar should be the number one way we meet the bulk of our electricity needs. It's already becoming comparable, if not cheaper than fossil fuels and still has room for more gains.

"Who says solar is expensive"
In fact, in many places it is cheaper than the fossil fueled alternative. How do we know? Well, one place to start is to look at actual contracts for projects.
http://votesolar.org/2011/09/who-says-solar-is-too-expensive/

While you're at it, check this out. Very impressive!
http://cleantechnica.com/2011/09/18/19-year-old-winning-awards-left-righ...

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