California solar project gets $1.4 billion U.S. guarantee
The U.S. gives its biggest backing yet to a renewable energy project, guaranteeing loans for a California development that uses the sun's heat to power a steam turbine.
The United States on Monday gave its biggest backing yet to a renewable energy project, guaranteeing $1.37 billion in loans for a California development by BrightSource Energy that uses the sun's heat to power a steam turbine.
BrightSource's proposed solar thermal plants are expected to generate about 400 megawatts of electricity and power about 140,000 California homes, giving it the heft to compete with plants fueled by coal and natural gas.
President Obama's administration has touted green energy investments as a way to create jobs and increase international economic competitiveness.
"We're not going to sit on the sidelines while other countries capture the jobs of the future--we're committed to becoming the global leader in the clean energy economy," Energy Secretary Steven Chu said in a statement.
The sector has seen projects being launched and agreements being signed with utilities, who count on solar thermal to meet California clean energy goals, but construction has yet to start on a large scale for the solar thermal industry.
Financing of projects has been a big challenge with the tightening of the credit markets as capital requirements of these green energy companies are very large.
Solar thermal technology is different from its better-known rival, rooftop photovoltaic. Solar thermal companies like BrightSource and rivals Abengoa Solar and eSolar have technology that uses the sun's rays, reflected by thousands of small mirrors, to heat liquids to create steam in turbines and generate electricity.
The conditional loan guarantees from the U.S. Department of Energy, the largest federal loan commitment offered to a renewable energy firm, would help BrightSource build three utility-scale solar thermal plants for its Ivanpah project, which will be located on federally-owned land in the Mojave Desert in southeastern California.
"It's a good beginning for the industry," BrightSource CEO John Woolard said in an interview. "It really allows Ivanpah to be the first (solar thermal) project to be constructed in almost 20 years now" in California.
California and other parts of the world are betting heavily on solar thermal. About a quarter of the clean energy contracts approved in 2009 in California by capacity was solar thermal, according to the Public Utilities Commission.
Construction on the first Ivanpah plant is expected to begin during the second half of this year, with commercial operations beginning in 2012.
All three plants are expected be on line by 2014.
The loan guarantee is conditioned on BrightSource meeting financial and environmental requirements, including local, state and federal regulatory approvals.
BrightSource has run into trouble from environmental groups who are concerned that the construction would harm desert plants and wildlife, including the desert tortoise.
The company earlier this month agreed to reduce the footprint for the Ivanpah project to minimize the environmental impact.
The company, which counts search giant Google and Silicon Valley fund VantagePoint Venture Partners among its investors, already has contracts to deliver more than 2,600 megawatts of power to California utilities PG&E and Edison International's Southern California Edison (SCE).
PG&E will purchase approximately two-thirds of the power generated at Ivanpah and SCE will purchase approximately one-third.
Woolard said that the key value of federal loan guarantees is that it helps strong renewable energy projects get financed, especially since the credit markets have yet to reach normal levels of activity.
It "replaces or helps shore up that component," he said.
Woolard did not reveal the total funding needed for the project but said the company would be raising equity financing from sources such as private investors, energy companies and investment funds.
"There is an equity commitment," Woolard said. "We will be going out to raise equity (financing) in the next four to six months. So that will be the next step in the process."
The loan guarantee is the sixth such offer to renewable energy companies by the Obama administration, which has touted green energy investments as a way to create jobs and increase international economic competitiveness.
Under the program, the Department of Energy issues a conditional commitment to guarantee loans to be provided by the U.S. Treasury's Federal Financing Bank.