$120 MILLION COST IS OBSTACLE

Published Thursday, March 8, 2001, in the San Jose Mercury News

BY MIKE ZAPLER, Mercury News

The city of famously foggy skies may become the capital of solar.

Reeling from spiraling energy prices, the city of San Francisco is pursuing what would be the most ambitious solar-power program in the nation.

Under the plan, the city would generate as much as 50 megawatts of power -- enough to meet from one-third to one-half of city government's needs. Voters this fall would be asked to approve $120 million in bonds to buy and install solar panels on hundreds of city-owned buildings and at 16 large reservoirs.

San Francisco's foggy weather would seem to be the biggest obstacle, but experts say it's not. The U.S. Department of Energy says San Francisco gets about 96 percent of the solar radiation of Sacramento, the current nationwide municipal leader in providing solar power.

Cost is the key question. The price tag is at least triple that for conventional or wind-powered energy sources.

The notion of using solar power has the support of Mayor Willie Brown and the city's 11 supervisors, although this particular proposal could be scaled back -- or even scrapped -- if officials can't find a way to pay for it. The city also could opt for a different plan. Board of Supervisors President Tom Ammiano is preparing a proposal that would cost significantly more than $120 million.

Still, in these early stages, proponents are bullish on solar's potential to shield the city from wild price fluctuations for conventionally-produced power -- and to shield the environment from greenhouse gases.

``First and foremost we're talking about making San Francisco energy self-sufficient with a clean and renewable energy source,'' said Supervisor Mark Leno, who chairs the city's finance committee and is trying to steer the $120 million plan through City Hall.

The high cost of producing solar energy -- 30 to 35 cents per kilowatt-hour vs. 4 to 10 cents for electricity from fossil-fuel plants, according to the city -- involves mostly up-front capital expenses. Photovoltaic panels are costly to purchase and install -- estimates are in the $3 million to $6 million per-megawatt range but the panels last at least 25 years and require little upkeep.

``It's a long-term investment,'' said Jimmy Jones, president of the Colorado Renewable Energy Society. ``The problem with solar is if it has to pay for itself in the next business cycle. But you don't have the risk of swings in fuel prices like you're experiencing in California, because the fuel is free,'' he said, referring to sunlight.

History of technology

The high cost of solar power -- and until recently, cheap and available fossil-fuel energy -- has made it slow to catch on in the United States. Solar makes up less than 1 percent of the nation's total energy output. But its reputation also suffered because of early, visible mishaps.

``In the 1970s, a lot of companies went into the solar-energy business and did not produce quality workmanship,'' said David Hochschild, an aide to Brown who is researching the solar proposal. ``Solar hot-water heaters broke down quite a bit and that gave solar energy a bad name. But the technology has come along a great deal.''

When the technology was first introduced in the 1950s, solar panels converted about 3 percent of sunlight into energy. Now it's up to about 15 percent. Another plus is that solar panels produce electricity at ``peak'' daytime hours when demand is highest, taking pressure off an overextended power grid.

Taken against a backdrop of rolling blackouts and acute power shortages, those advantages have triggered a surge of interest in solar power in California. Berkeley-based PowerLight Corp., which recently installed a 500-kilowatt system on top of Santa Rita jail in Alameda County and is advising the city on its solar plan, has doubled its sales each of the last five years. The company expects to triple sales this year, said Greg Rosen, manager of financial services.

San Francisco wouldn't be the first city to develop solar power, but its proposal would be by far the most ambitious. The Sacramento Municipal Utility District derives about eight megawatts from solar panels.

San Francisco, by contrast, would generate 30 to 50 megawatts.

``That would be a huge amount,'' Jones said of the city's plan. The city government uses about 100 megawatts. The entire city, including business and residential consumers, uses about 1,000 megawatts.

Utilities nationwide produce just over 100 megawatts of solar power; total worldwide output is about 250 megawatts, according to Terry Peterson, a solar expert at the Electric Power Research Institute.

Funding the plan

Peterson said a solar-power program could rise or fall on whether the city can persuade the state to provide subsidies and rebates not currently available to municipalities. Long-term contracts with companies that build and install solar panels would also be key, he said, both to guarantee a huge supply of photovoltaic panels and to lower prices.

Officials are weighing two possibilities to pay for the proposal. One would use the savings from not having to buy power on the open market. San Francisco's Hetch Hetchy dam system is already a power producer, but this year the city has had to buy extra power to fulfill contracts it has to supply electricity to other cities. Overall, the city says, it may end up paying $45 million more than it expected for electricity this year.

The other option would be to use property taxes to pay off the bonds -- a politically risky proposal that would need two-thirds approval by voters.

A solar-energy bond also would have to compete with other property tax-funded proposals -- hospital upgrades, community college improvements and affordable housing -- that are likely to be on the Nov. 6 ballot.

San Francisco has paid a steep price for relying on hydroelectric power from its Hetch Hetchy system and conventional power from Pacific Gas & Electric to meet its energy needs.

The energy crisis has demonstrated ``the current system doesn't work,'' Hochschild said. ``I think there's a political will to see something dramatic done, so it's a good bet that it will happen. But there are a lot of logistical questions that have to be answered.''

Solar systems

The city would employ a type of solar power known as photovoltaic. Solar panels capture sunlight, and a semiconductor similar to that found in a computer microchip converts light energy into an electric current that can be used immediately or stored in a battery.

In Sacramento, many solar-powered homes are connected to the city's overall energy grid under a system that works like an electricity insurance system. When a solar home is producing more power than it needs, it feeds the surplus energy back into the grid, lowering the utility bill. If the solar panels aren't producing enough power, the home can draw from the power lines.

State law prevents large-scale systems -- such as the one contemplated in San Francisco -- from participating in that program. But a law pending in the state Legislature would change that.

City officials also hope to qualify for state and federal renewable energy subsidies -- now geared mostly toward homes and businesses.

Meanwhile, Mayor Brown recently announced a public education effort to encourage 10,000 homes and businesses to have solar panels by the year 2010.

Contact Mike Zapler at mzapler@sjmercury.com or (415) 394-6875

-- Swissrose (cellier3@mindspring.com), March 08, 2001