PG&E Signs 230MW Solar Power Deal with NextLight

| About: PG&E Corporation (PCG)

By Ucilia Wang

Pacific Gas and Electric (NYSE:PCG) said it has signed a power purchase agreement with NextLight Renewable Power, which would supply the power from a 230-megawatt project.

The San Francisco-based utility, as usual, didn't reveal the cost of the project. NextLight plans to use solar panels for the project, which is set in Antelope Valley. NextLight expects to start delivering power in 2011, but the project isn't scheduled for completion until late 2013.

NextLight, also based in San Francisco, was founded and funded by private equity firm Energy Capital Partners to develop power projects primarily for utilities, the company said.

The contract is one of many signed by PG&E since 2002 to fulfill a state mandate that all investor-owned utilities must secure 20 percent of its power from renewable sources by 2010. The state is looking at mandating 33 percent by 2020.

Signing power purchase agreements has been a norm for utilities that don't want to assume the risks of developing and operating renewable energy. Renewable power tends to come from on newer technologies – some yet proven in the field – compared with electricity from coal- and gas-fired power plants.

PG&E's deal with ocean power developer Finavera Renewables fell apart when state regulators deemed the contract too expensive last year. The utility also found itself having to work with a different solar power provider when First Solar bought the project development business of OptiSolar and took over the 550-megawatt project OptiSolar was developing to sell electricity to PG&E.

With improvements in solar technologies, and an attractive federal tax credit that is available to utilities starting this year, utilities are becoming more interested in owning their own solar power generation facilities.