NEW YORK - Tucson Electric Power, a unit of UniSource Energy Corp, agreed to buy power from two solar energy systems to be built in Arizona that would generate enough electricity for more than 6,000 homes, the company said in a release late Wednesday.

The facilities include a 25-megawatt photovoltaic array and a 5 MW concentrating solar power plant. Both would be completed by January 2012.

Tucson Electric, which serves about 400,000 customers in Arizona, agreed to buy power from both systems for 20 years. The project developers can use the 20-year purchase agreements to secure financing.

A spokesman for Tucson Electric said the company did not disclose the terms of the agreements.

Using industry estimates, a photovoltaic system would cost about $6,000 per kilowatt, or about $150 million for a 25 MW system, while a solar thermal system costs about $5,000 per kilowatt, or about $25 million for a five MW system.

By comparison, it costs about $700 per kilowatt to build a natural gas plant.

Fotowatio Renewable Ventures will own and operate the 25 MW facility, which will be nearly twice as large as Fotowatio's 14 MW system at the Nellis Air Force Base in Nevada. Tucson Electric said the Nellis facility was currently the biggest solar power system in the nation.

Bell Independent Power Corp will own the five megawatt system, which will use rows of parabolic troughs and a heat-transfer and storage system to create pressurized vapor used to drive a turbine.

STATE APPROVAL NEEDED

Tucson Electric planned to seek state approval for the solar contacts soon since the utility plans to recover costs from customers.

The Tucson Electric spokesman said power from the solar facilities would cost more than the utility's current power purchase costs.

Power from fossil fired power plants was currently less than the solar facilities because natural gas was cheap. Natural gas prices however are very volatile - prices were over $13 per million British thermal units last summer and under $3 a couple weeks ago.

In the future, if gas prices rise (prices are mow over $3) and the federal government imposes greenhouse gas mandates limiting carbon dioxide emissions from coal and natural gas-fired plants, power from the solar facilities could cost less than power from fossil facilities, the spokesman said.

The utility planned to recover part of the cost of the solar contracts as purchased power the same as it recovers power from fossil plants and the rest from a surcharge created to support the state's renewable mandates.

The state wants utilities to increase the amount of power from renewable sources up to 15 percent by 2025.

The 25 MW system would avoid production of more than 48,000 tons of CO2, while the five megawatt system will offset more than 16,000 tons of CO2, the company said in the release.

To meet the renewable mandate, the spokesman said Tucson Electric and its sister company, UniSource Energy Services, have sought more solar power through a request for proposals. (Reporting by Scott DiSavino; Editing by Christian Wiessner)

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