WASHINGTON – Two power line projects in Arizona could lose access to hundreds of millions of dollars in federal loans in the fallout after the government’s support for a bankrupt solar-energy firm.
A House bill would stop the Western Area Power Administration from borrowing any more of the $3.25 billion available through the American Recovery and Reinvestment Act.
The measure is a “necessary response to the recent bankruptcy of Solyndra,” a solar power firm in California that went bankrupt after receiving a $535 million federal loan guarantee, said Rep. Doc Hastings, R-Wash., chairman of the House Natural Resources Committee.
“WAPA’s authority specifically allows for a bailout by taxpayers,” Hastings said to a hearing Thursday before the committee’s Water and Power Subcommittee, adding that fighting to keep the borrowing power would be “defending the indefensible.” The bill is sponsored by Rep. Tom McClintock, R-Calif.
But while Hastings’ testimony targeted Solyndra, the bill could make two major power projects in Arizona ineligible for millions of dollars in loans — the Centennial West Clean Line and Sonoran-Mojave Renewable Transmission projects.
WAPA, an Energy Department agency, said it is considering federal funds for the Arizona projects, but has not said how much it would borrow. If McClintock’s bill is successful, the projects’ developers would have to look elsewhere for funding, said WAPA spokeswoman Lisa Meiman.
The Centennial West Clean Line project would cost an estimated $2.5 billion to build a 900-mile cable through Arizona, connecting renewable energy from New Mexico to Southern California. It would create 500 permanent jobs and 5,000 construction jobs, said Jimmy Glotfelty, executive vice president of Clean Line Energy Partners LLC.
The Sonoran-Mojave project — called SMRT or “smart” — would connect the transmission hub near Palo Verde Nuclear Generating Station in Maricopa County to cities as far west as Vista, Calif. There is not yet a cost estimate for the project.
McClintock’s bill would only prevent loans approved after Sept. 15, so WAPA can still get $91 million to improve transmission of renewable energy in southern Arizona to the Palo Verde hub.
Lauren Azar, a senior adviser to Energy Secretary Steven Chu, said at Thursday’s hearing that repealing the borrowing authority is not the most prudent way to ensure that the government does not see another Solyndra.
“I’ve discovered ways this subcommittee could minimize the risk associated with WAPA, and I’d be happy to work with you to get this done,” she said.
Azar also testified that projects partly funded by WAPA loans could prevent another blackout like the one Southern California and Arizona experienced earlier this month.
“If the West needs more transmission, why would someone try to eliminate the government financing for that transmission?” she asked. “Policy alone appears to be driving this bill.”
SMRT would provide the Southwest with enough transmission capability to avoid a similar incident, said Ron Moulton, a WAPA transmission services manager in Phoenix. He said Clean Line would likely help, too, although it is still too early in that project to be certain.
The Clean Line also has private-sector backing, which makes it far less vulnerable than Solyndra to missing payment on government-backed loans, Glotfelty said.
“Western (WAPA) is in a boat with a lot of other financial institutions, and that is a risk-mitigation tool,” Glotfelty said. He said WAPA has weighed its bets so carefully that it borders on being “a little too cautious.”
But economics professor Robert Michaels said the energy being transmitted by the line is fundamentally risky because it must be propped up by government money.
“The renewables that we are talking about are renewables that do not pass the market test,” said Michaels, of California State University, Fullerton. “Wind, solar, they rely on subsidies.”Joshua Armstrong is a reporter for Cronkite News Service