Solar Energy Eclipse : Low Oil Prices Cast Dark Shadow Over Central California Plant

While American troops were fighting a war, in part to keep oil flowing from the Middle East, owners of the largest solar energy plant of its kind in the world began dismantling the facility, panel by panel.

Today, about 20% of the panels at the Carrizo Plain solar power plant have been sold. While the plant remains in operation, workers continue to remove the panels because the company can make more from selling them than from selling electricity.

“We all think it’s pretty strange, that after having to fight a war over oil, we’re still selling off these panels,” said Scott Altenburger, plant manager, as he walked through the warehouse where workers were packing panels for shipment. “You’d think now . . . people would be more interested in developing a domestic energy source.”

But a lack of government support for renewable energy during the Reagan and Bush administrations, the elimination of tax credits and falling oil prices have created serious problems for solar companies. Last week, Los Angeles-based Luz International Ltd., one of the nation’s prominent solar energy firms, laid off 350 workers--about half its permanent work force--and postponed construction of a solar plant in the Mojave Desert.

While the entire solar industry is suffering, solar projects that provide electricity to utility companies have been particularly hard-hit. California is one of the few states that has these large-scale projects, and the state Public Utilities Commission is exploring rate increases for alternative energy producers. But the rates may not be high enough to save some of the projects.

In order to stay in business--and replace the solar panels that have been sold--Carrizo plant officials said they need three times the current rate.

The plant is selling a reduced amount of electricity to Pacific Gas & Electric. But if conditions for solar energy do not improve, the Carrizo plant--about 60 miles east of San Luis Obispo--will end up selling all of its panels within five years, then shut down, company officials said.

PG&E; pays the plant a rate based on the current cost of oil and natural gas. But oil and gas prices have plummeted during the last decade, creating less demand for solar energy.

It is unfair to force solar companies to compete with traditional energy producers, said Scott Sklar, director of the Solar Energy Industries Assn. Government subsidies to oil companies--including generous tax breaks for exploration and drilling--are not included when determining the true cost of oil and natural gas, he said.

Other hidden costs, Sklar said, include pollution, acid rain, spill cleanups and even military spending to keep shipping lanes open in the Persian Gulf. As a result, he said, the cost of oil is artificially low.

“If the oil companies were taxed for some of these things, it would at least level the playing field and make it easier for us to compete. . . ,” said Mike Elliston, a co-owner of the solar plant. “Right now there’s no financial advantage for us to produce energy that has no thermal pollution, no noise pollution and no air pollution.”

The Carrizo plant was built by Atlantic Richfield Co. in the early 1980s, when the oil company was making a major effort to secure alternative energy sources. Arco had counted on the price of oil climbing to more than $60 a barrel at the end of the decade, said Albert Greenstein, an Arco spokesman. Instead, it is about $20 a barrel.

“We could see the writing on the wall . . . and solar remained a small niche market,” Greenstein said. “Without tax credits and government support, these kinds of facilities aren’t practical anymore.”

Arco sold the company and a smaller solar plant in the Mojave Desert in 1990 to a group of investors who formed the Carrizo Solar Corp. The company determined that it needed a price of 10 cents per kilowatt-hour from PG&E; to make a profit, Elliston said. But because oil and natural gas prices are low, PG&E; pays only about 3 cents per kilowatt-hour.

The PUC, which sets the state’s utility rates, is considering higher rates for “clean power producers,” as early as next year, said Tom Thompson, a senior engineer for the commission.

“We’d like to keep this plant together,” Elliston said. “But if we can’t get a high enough rate, we’ll have to sell off all the panels . . . and the rest of the equipment might end up as scrap metal.”

The company has sold about 15,000 panels in the last year--out of a total of more than 100,000--for about $1,000 a piece, Elliston said. Some of these panels are damaged because of a faulty design, but they still are about 80% effective, and most have ended up on the roofs of rural homes throughout the country and in Central and South America.

Although it is partially dismantled, the Carrizo plant still provides enough electricity for several thousand homes. The 177-acre facility, located in a remote valley, is an arresting site--endless rows of gleaming solar panels atop rotating bases that follow the sun, surrounded by vast stretches of farmland.

This is a photovoltaic plant--the largest in the world--which uses specially treated silicon wafers to convert sunlight into electricity. Luz International, which operates nine solar plants that provide electricity to Southern California Edison Co., employs a technology that uses the sun’s heat to generate steam that turns electrical turbines.

Large-scale solar projects have fallen upon hard times since the days of the Jimmy Carter Administration, when the federal solar energy budget was at a high of $680 million.

The Ronald Reagan Administration displayed its distaste for alternative energy in 1986, when it stripped the White House roof of solar panels that had been installed during Carter’s tenure. The next year, the federal solar budget dropped to a low of $98 million. And while Reagan was in office, most tax credits to encourage solar energy expired, including the 40% tax credit individual homeowners received for investing in solar heating systems.

Spending for solar projects has increased slightly under the Bush Administration. But the recent national energy strategy was centered on domestic oil production and nuclear power, and included few concrete incentives or tax credits to encourage solar energy.

“Everything now is based on the short-term point of view,” said Sklar of the Solar Energy Industries Assn. in Washington. “You’d think that after the war, the government would re-evaluate its energy policy. But oil is cheap now, so everything else is being ignored.”

And because of a lack of government support, America is losing its edge in solar energy technology, Sklar said.

“This is the VCR syndrome all over again,” Sklar said. “We spend billions to develop the technological edge, and then let our international competitors make all the money off it.”

“Acid rain, smog, pollution is something people are becoming more and more concerned about,” Block said. “So we still think a clean energy source like solar has a strong future.”