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By Anonymous Mike, pseudonymously.

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Monday, October 20, 2008
The Glint of Money

Earlier in the year, I wrote about Solana; the large solar thermal energy plant that APS has partnered to build out by Gila Bend.

Solana electricity is forecast to cost about 40% more than electricity from traditional sources. The reason Solana would be profitable was that APS fully expects some sort of carbon regulation regime to be implemented by Washington which would even the cost score between Solana and traditional sources.

There is a thin line between prudent corporate planning for future government regulation and becoming a stakeholder in government regulation. Solana was planned and pushed during times when the economy was still growing and energy prices climbing; recent months have reminded us that neither of those two phenomena are permanent and so that there is no guarantee by the time Solana is operational that American voters and consumers would be willing to pay an environmental premium on energy.

So if carbon regulation is undermined what happens to Solana? APS is commited to buying Solana energy for the next 30 years; it would be another financial blackhole for an already troubled company. With projects like Solana, wouldn't APS have a vested interest in government regulation of carbon?