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Box 2: CSTRR’s Experience The Corporation for Solar Technology and Renewable Resources (CSTRR), an independent, non-profit development authority with tax-exempt status and the ability to float bonds, sought to develop 120 MW of solar-based electricity generation in the Nevada desert. The U.S. Department of Energy provided $3 million in funding and offered cooperation from the Western Area Power Administration (WAPA) — a federal power marketing administration — to deliver green power to federal facilities from the central-station solar farm. Unfortunately, CSTRR found out firsthand the problems of selling renewable energy to the federal government. First, most federal facilities cannot enter into power purchase agreements for longer than 10 years. (The exceptions are DoD facilities, and even they require rarely granted waivers for contracts over 10 years.) For capital-intensive renewable energy projects, uncertain demand during the project financing period can force suppliers to raise electricity prices substantially during the purchase period to recover the full investment. CSTRR tried to circumvent this obstacle by entering into long-term agreements with WAPA itself, which could then contract with federal facilities for shorter time periods. A second problem emerged: unlike wholesale customers, most federal facilities in regulated electricity markets could only contract with their local franchise utilities. Few of these were interested in teaming with CSTRR to support its generation facilities, which they felt could cut into their sales and would be supporting a potential competitor in a deregulated market. Third, the National Park Service, which was interested in purchasing green power, could not coordinate its many southwestern facilities into a single power purchase solicitation. Fourth, one key financial foundation of CSTRR — tax-exempt financing such as industrial development bonds — was eliminated by a 1996 federal law for energy projects that could eventually compete in the deregulated electricity market. And finally, within the few federal facilities that expressed great interest in purchasing green power, project champions were usually overruled by their bosses, who saw that “statutes that require competition and least-cost purchasing prevail over the less specific policies that encourage renewable energy use.” * In a sharp change of course, CSTRR has since shifted its attention to forming partnerships with private homebuilders to install distributed solar technologies, such as solar water heaters and PVs. |
* McNeil Technologies. (Kevin DeGroat and Jonathan Cross, Principal Investigators), Barriers to Large-Scale Procure-ment of Renewable Energy by the Federal Government: CSTRR’s Experience. March 1998.