AdvanceIndiana: Sunlight Needs to be Shined on Airport; IBJ: Solar farm is a tax; ‘Green’ funding is losing glow

Dear IndianaDG Readers:

It looks like the renewable energy naysayers want to tarnish the recent announcement about the Indianapolis Airport Authority (IAA) 10 MW solar farm using the Indianapolis Power and Light (IPL) Rate REP or feed-in tariff. Clearly, readers of this blog know that I don't agree with the sentiments expressed by the Advance Indiana blog nor the IBJ Letter to the Editor (LTE) or IBJ Editorial reprinted below BUT I think you need to know what is being said out there. We need someone to take on these folks. Any volunteers?

Laura Ann Arnold

http://advanceindiana.blogspot.com/2011/10/sunlight-needs-to-be-shined-on-airport.html

Monday, October 03, 2011

Sunlight Needs To Be Shined On Airport Solar Farm Project

Indianapolis Airport Authority officials have signed on to the state's largest solar farm project to date in a deal that has been cloaked in secrecy. On September 20, 2011, IAA announced a long-term, $35 to $45 million solar farm project on airport property adjacent to I-70 had been awarded to ET Energy Solutions, LLC, a joint venture involving three local firms, a little more than four months after it issued an RFP seeking proposals for the project on May 11. RFP responders were given just a month to respond to the 23-page RFP document. "No public funds or airport costs are anticipated to be involved with the project" according to a press release put out announcing the deal; however, it is unclear what, if any, public benefit will come from the project.

The joint venture comprised of three locally-based companies, including Telamon, Johnson-Melloh Solutions and Schmidt Associates, will presumably rely on generous government tax credits and its own private financing to build the solar farm that is expected to generate 15 million kilowatt hours of electric energy a year, enough to power approximately 1,200 homes. The solar panel technology being deployed at the solar firm is manufactured by a Japanese-based company, Sanyo. It will involve 41,000 solar panels spread over 60 acres. Interestingly, none of the joint venture partners has any experience developing and operating solar farms despite the RFP's requirement that the responders provide their qualifications for developing and operating solar farms with a preference afforded to responders with experience with "larger solar farm applications." Indianapolis Power & Light will purchase the electric power generated by the solar farm under a power purchase agreement.

The press release put out by the airport says nothing about what the terms of the land lease for the joint venture are to operate the solar farm on airport property for an initial period of up to 30 years. The RFP indicates that the successful respondent would be required to enter into a land lease with the airport and pay an unspecified amount of rent to the airport annually, but the press release makes no mention of any rent payments. A review of the airport authority's board agenda packet for its September meeting that took place prior to the announcement makes absolutely no mention of any approval action taken on the solar farm project, nor is it mentioned in the board minutes or board agenda packets for any of IAA's board meetings since April.

The public learns more about the project in a letter to the IBJ's editor authored by Stephen Woodrow in the publication's most recent edition than the airport's press release or any media reports on the deal. Woodrow's letter calls the solar farm a "tax" on IPL's ratepayers. According to his letter, IPL will purchase the electric power from the solar farm based on the Renewable Energy Production tariff approved by the IURC for IPL, which is 20 cents per kilowatt hour. "This represents a premium of eight times over IPL's published cost of 2.5 cents per kilowatt hour for the production of an incremental kilowatt hour of power," Woodrow claims. "Most noteworthy, the tariff approved by the IURC further provides for the cost for this inefficient solar project to be allocated to and recovered from the basic rates paid by all IPL customers and not IPL shareholders," Woodrow adds.

Woodrow noted the irony that in the same edition of the IBJ where the lead editorial warned that alternative energy was "fraught with risk" and cautioned against government subsidies, the business newspaper provided "only cursory page 6 coverage of the Indianapolis Airport Authority's awarding of a contract to a private company to develop and operate a '$35 million to $45 million' solar farm." Woodrow challenges the contention that no public funds are to be used for the project. "The reality is that this project is to be 100-percent funded by the 'public' in the form of captive and unrepresented ratepayers of the Indianapolis Power & Light utility monopoly," he contends.

According to responses to questions tendered during the little more than 30-day response period, there was only one meeting with potential responders conducted by airport officials on May 25, 2011 and all written questions had to be submitted by June 7. Airport officials declined the opportunity to meet further on-site with potential respondents in early June prior to the submission of proposals and rejected a request to extend the due date for proposals beyond June 16. It is unclear how many responses the airport received. The press release makes no mention of how many responses the airport received to the RFP.

Posted by Gary R. Welsh at 9:39 PM

Solar farm is a tax

Indianapolis Business Journal (IBJ) http://www.ibj.com/solar-farm-is-a-tax/PARAMS/article/29844

Letter to the editor

October 1, 2011

It is ironic that in the same [Sept. 26] issue where the lead editorial warns that alternative energy is “fraught with risk” and cautions against government subsidies, IBJ provides only cursory page 6 coverage of the Indianapolis Airport Authority’s awarding of a contract to a private company to develop and operate a “$35 million to $45 million” solar farm.

An earlier IBJ online story quoted the airport as saying “no public or airport funds are expected to be involved in the project.” The reality is that this project is to be 100-percent funded by the “public” in the form of the captive and unrepresented ratepayers of the Indianapolis Power & Light utility monopoly.

The fundamental economic principle behind this project is outrageous and unjustifiable payments to be made by IPL to the airport (and by extension, the project developer/operator) under its “Renewable Energy Production” tariff. IPL’s tariff provides for a payment of 20 cents per kilowatt hour produced by solar projects of this type. This represents a premium of eight times over IPL’s published cost of 2.5 cents per kilowatt hour for the production of an incremental kilowatt hour of power.

Most noteworthy, the tariff approved by the Indiana Utility Regulatory Commission further provides for the cost for this inefficient solar project to be allocated to and recovered from the basic rates paid by all IPL customers and not IPL shareowners.

This scheme represents an unwarranted transfer of wealth from IPL ratepayers to the airport authority and the project developer/operator. Quite simply, it is taxation without representation.
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Stephen Woodrow
Indianapolis

IBJ EDITORIAL: 'Green' funding is losing glow

IBJ Staff http://www.ibj.com/editorial-green-funding-is-losing-glow/PARAMS/article/29713

September 24, 2011

Americans are an exuberant bunch. We fell head over heels for all things Internet a decade ago. And rather than learning our lesson when the bubble burst, we flocked to housing, only to see it suffer the same fate.

Is alternative energy the next big flop? That’s a timely question in the wake of the spectacular collapse of solar cell manufacturer Solyndra, which received $528 million in federal loans and then went bankrupt.

The same market forces that doomed that California company have cast uncertainty over Abound Solar, which received a $400 million federal loan guarantee last year. It planned to use some of the money to expand its solar-panel-making operation to the massive, unused Getrag transmission plant in Tipton, where it hoped to employ as many as 1,200.

We hope that works out, but there is cause for worry. While Abound uses a different technology from Solyndra, both firms are suffering from a plunge in prices caused by increased supply and lackluster demand.

Another “green” energy firm stoked with federal money—New York-based Ener1—also is ailing. The firm, which makes lithium-ion batteries for electric and hybrid vehicles, could lose its NASDAQ listing if its shares continue trading below $1.

The company received a $118 million federal energy grant, and said it hoped to boost central Indiana employment to 1,400. But that’s increasingly looking like wishful thinking.

The company’s plans to collect even more federal money also are looking dicey. In a regulatory filing, Ener1 said it had applied for $290 million in low-interest loans from the U.S. Department of Energy.

As Wunderlich Securities said in a report last month, “We all have to rethink what is possible now that the auto market is not widely embracing lithium-ion drivetrains. We expect [Ener1] will carefully resize the business model to match existing opportunity.”

The lesson here isn’t for everyone to steer clear of alternative energy. Eventually, there are sure to be many big winners in the sector. But financial backers need a greater appreciation for the inherent risks in emerging industries. That’s especially true of the cash-strapped federal government, which can ill-afford to have billions in loan guarantees and grants go for naught.

Fortunately, not all units of government got caught up in green euphoria. Indiana’s incentive packages were modest compared with those doled out by other states, especially Michigan. And the bulk were performance-based—meaning recipients cashed in only if the promised jobs materialized.

In an interview with IBJ in June 2009, at the height of green mania, Mitch Roob, then Indiana’s commerce chief, urged caution about the fledgling lithium-ion battery industry—a view that now seems prescient.

“I think the industry, relatively speaking, is in an immature state,” he said. “Throwing enormous amounts of money at fledgling organizations probably isn’t the greatest idea.”•

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To comment on this editorial, write to ibjedit@ibj.com.