Why is the Obama administration giving tax breaks for private projects that aren't available to cities?
EDITORIAL The concept is so good it's hard to imagine why anyone would criticize it: the San Francisco Public Utilities Commission wants to cover the Sunset Reservoir with solar panels, creating the largest municipal solar generating project in the country. The money would come from existing SFPUC revenue no new taxpayer dollars. The Sierra Club loves the idea, and Mayor Gavin Newsom is pushing it.
We agree that the reservoir is a perfect place for a solar project, and that the city ought to be pursuing this.
But the structure of the deal makes us uncomfortable and the financing shows a serious flaw in how federal money for renewable energy is allocated.
Under the terms of the proposal, a private company, Recurrent Energy, would finance and build the plant at a cost of perhaps $40 million. The facility would have the capacity to generate 5 MW of electricity, enough to power 2,500 houses. The city, in turn, would agree to buy that power for the next 25 years, at about 23.5 cents per kilowatt hour far more than the current market rate for electricity but less than what other cities have agreed to pay for long-term solar contracts.
The city would have an option to buy the plant from Recurrent after seven years for $33 million.
The good news is that this would be a public-power project the city would own the electricity and could use it to power public buildings and eventually, once the community choice aggregation (CCA) system is running, could sell it as retail power to residents and businesses.
But Sups. Ross Mirkarimi and David Campos have asked the obvious question: Why is a private company even involved? Why can't the city build the solar generating station itself? The CPUC's answer: It's cheaper to let Recurrent do the work because the private outfit will get a $12 million tax break from the federal government.
That's a serious problem why is the Obama administration giving tax breaks for private projects that aren't available to cities? "What we should be looking at is why San Francisco, with all its clout in Washington, can't get that same sort of subsidy for a public project," Campos told us.
Or as Mirkarimi put it: "This only makes sense to me if there's some guarantee that the city will actually buy the plant in seven years. Otherwise we're going to look back at this in year 15 and realize it's not such a good deal."
The city's energy future is very much up in the air right now CCA is on the cusp of viability, there's still an active public-power movement, and it's very hard to say what the city's needs will be (or what the price of solar energy will be) 10 years from now, much less 25. So we're very nervous about signing a contract of that length with a private company.
Yes, the Recurrent deal offers solar now and that's important. But the supervisors shouldn't rush this through. At the very least, they should pass a resolution asking House Speaker Nancy Pelosi to seek to direct the same subsidies that private companies can get to public solar projects and to delay a final vote on this until there's a better analysis of why a private company should be given a long-term contract for what ought to be a public project. *