FPL Grabs the Lead in Renewable Power

(page 2 of 2)

From Standard & Poor's Equity Research

FPL believes, however, that it can develop solar power profitably, even without the federal production tax credit that wind power enjoys but solar does not. FPL's solar plants do not use the photovoltaic cells that convert sunlight directly into electricity, which are expensive to build and offer no way to store power during nighttime or periods of low light. Instead, FPL's solar plants use "thermal" solar power, in which sunlight is reflected from a trough to heat a water pipe, creating steam that drives a traditional turbine.

Ausra, which will design and supply the equipment for FPL's new plants, says that its plants can even store solar energy in the form of hot water and release it at night or on cloudy days, making it more efficient. Ausra claims large-scale plants can produce power for eight ¢ per kilowatt hour—about the same as natural-gas-fired generation—and that with heat storage it can even compete with coal-based generation. Ausra's plants also include the ability to burn natural gas, meaning that the facility can still produce power at night or on cloudy days using the same turbine.

State Mandates Are Key

Much of the benefit FPL will likely gain from expanding its solar power capacity is the experience and relationships it forges with regulators and suppliers that should help it build other solar facilities, McCann says. FPL predicts solar generation capacity will expand to about 5,000 MW over the next 10 to 15 years, led by state mandates for renewable power.

Of the Sunbelt states where solar is most attractive, almost all of them have mandated renewable power targets, several of which include specific targets for solar or non-wind power. Colorado, for instance, will require 10% renewable power by 2015, 4% of which must come from solar. Minneapolis-based Xcel Energy (XEL; S&P investment rank, 4 STARS, buy), which sells electric power in the state, has already issued a public call seeking a developer that can supply its Colorado operation with 13,700 MW of solar power annually. Nevada requires 5% of its power be solar-generated by 2015, and Texas also mandates non-wind renewable power.

With its leadership position in renewable power, FPL stands a good chance of being able to develop and operate a large portion of that capacity, McCann said. "The company can use the fact that it is No. 1 in wind and solar to commercial advantage when it goes to develop new projects in other states," he says. And the opportunities should only increase in the future—a measure already passed by the House of Representatives would mandate 15% renewable power by 2020 across the entire country.

Scully is a reporter for Standard & Poor's Editorial Operations .