Cuts to DOE Loan Program Could Set Back U.S. Solar Industry

Industry executives say that several planned solar plants would be canceled if House Republicans succeed in eliminating key DOE loan guarantee programs

Solar roof with construction crane
Image: Andy Wright

Share this article

Solar companies are warning that if Congress kills two major Department of Energy funding programs this spring, the country would squander the opportunity to exploit recent breakthroughs in solar energy development.

For Tenaska Solar Ventures in Omaha, Neb., a cut in DOE loan guarantees could mean losing two planned solar plants in Southern California, which in turn would halt operations at a new manufacturing facility for solar parts.

“It would kill off a number of projects that otherwise would have been created,” Tenaska spokesperson Bart Ford told SolveClimate News.

Through its CSOLAR Development subsidiary, the firm plans to supply 130 megawatts of photovoltaic (PV) capacity from its Imperial Solar Energy Center (ISEC) South project.

A second 150-megawatt project at its ISEC West location would triple the amount of concentrated photovoltaic (CPV) capacity that research consultancy Strategy Analytics expects to be installed in the U.S. this year.

The facility is the largest power station of its kind to be announced worldwide, with potentially enough capacity to serve 55,000 California homes.

CPV currently accounts for 0.1 percent of the total domestic PV market, as the relatively new technology slowly begins to compete with traditional lower-cost silicon PV projects.

The technology, which is best suited to extremely sunny areas, uses optical lenses to concentrate sunlight onto high-efficiency solar cells. The panels are mounted on tracking systems to follow the movements of the sun’s rays.

Ford said that both projects have secured 25-year power purchase agreements from San Diego Gas & Electric (SDG&E), and that pricing for the deals was based on receiving credit subsidies. 

He declined to disclose the total costs of the projects or the amount of DOE funding on the table, explaining only that, “If the loan guarantee goes away, then likely our solar projects go away.” 

Solar Surged in 2010 From Loan Guarantees

The DOE loan guarantees encourage investment in risky, innovative energy projects by ensuring financial institutions and project developers that the government will cover loans they cannot pay back.

Under 2009’s American Recovery and Reinvestment Act (ARRA), the Obama administration created the temporary Section 1705 program to provide loan guarantees to projects for renewable energy, advanced biofuels or upgrades to the national transmission system.

The program initially appropriated $6 billion for credit subsidy fees, which is the amount the government estimates it would have to pay out. The subsidy account was later reduced to $2.5 billion.

The 1705 program has since allowed the DOE Loans Programs Office to conditionally commit or close $18 billion in loan guarantees to 20 clean energy projects, creating or saving 20,000 jobs across 13 states, office spokesperson Ebony Meeks told SolveClimate News.

“For every dollar appropriated, the loans are driving thirteen dollars of private sector investment,” she said via e-mail. “The DOE has thus far pledged to finance eight renewable energy generation projects with a combined capacity of more than 4,000 megawatts — enough to power more than one million homes.”

Section 1705 is a follow up to Section 1703, a permanent loan guarantee program to support innovative energy technologies that are not commercially available. Applicants in this program pay an insurance premium and include projects in nuclear power, fossil fuels, carbon capture and storage, industrial energy efficiency and renewable energy.

The loan office’s budget for fiscal year 2012 proposes $200 million in credit subsidies for the 1703 program. The average credit subsidy for solar generation and manufacturing projects is $156 million in total, with biomass, geothermal plus wind generation and manufacturing averaging a collective $150 million in credit subsidies.

Solar utility installations surged last year due in large part to the loan programs.

In 2010, the U.S. installed 242 megawatts of utility PV capacity — more than double its capacity from 2009, according to a 2010 market review by the Solar Energy Industries Association and GTM Research.

An additional 700 megawatts of utility PV are slated for installation this year, the report says, although this number is largely contingent upon sections 1703 and 1705 remaining intact.

Resolution Would Put 31 Clean Energy Projects At Risk

The sections could be scrapped altogether if the GOP House majority’s proposed continuing resolution has success in shaving $2 billion from the entire DOE budget. A third loan program — the Advanced Technology Vehicles Manufacturing — would be saved.

Meeks said that if the resolution passes this spring, then 26 nearly finalized loan guarantee agreements would never be completed, while five commitments for loan guarantees  that had already been issued would be withdrawn.

More than half of the total are solar projects.

“These 31 projects are seeking $15.5 billion in loans to finance $24.2 billion in new energy infrastructure, which would put more than 35,000 Americans to work,” she said. “The proposed cuts will drastically decrease the opportunity for any renewable energy project to receive support from DOE.”

Tenaska spokesperson Ford said: “Hopefully Congress will take into account … that providing a stable business environment is very important to long-term project development.”

The solar developer’s uncertainty has also trickled down to Soitec, a French solar parts manufacturer whose CPV-focused subsidiary Concentrix Solar is supplying modules to the ISEC West solar plant.

Clark Crawford, who heads Soitec’s local operations, said the firm was investing more than $100 million in a new San Diego manufacturing facility that would supply 200 megawatts worth of solar modules for IPEC West and other large-scale solar projects.

He said that while Soitec itself did not apply for a DOE loan guarantee, the firm’s new plant is highly dependent on the completion of Tenaska’s project and its corresponding power purchase agreement with SDG&E.

He added that slashing the loan guarantee program “delays or threatens the go-ahead with our manufacturing facility plans in San Diego,” as well as some 450 high-end technology jobs the facility would create.

SolarReserve: ‘Calamitous Outcome’ if Funds Cut

Michael Whalen, chief financial officer for SolarReserve, said that cutting the DOE funding plans would have “a calamitous outcome” for two utility-scale concentrated solar thermal projects set to start construction this year.

He said that the Santa Monica, Calif.-based development firm was an ideal candidate for the 1703 innovation loans because its projects utilize technologies that have yet to be deployed on a large scale.

Solar thermal technology does not involve PV cells, but rather uses a field of mirrors to direct sunlight at a central receiver atop a tall tower. As the receiver heats up, a fluid made from salt compounds runs through a boiler-like system that captures the heated liquid.

Unlike solar panels that only operate when the sun shines, the thermal tower can store the heated fluid during the day and run liquids through a heat engine at night to turn a generator and make electricity.

Last December, SolarReserve secured a power purchase agreement with Pacific Gas & Electric (PG&E) for its planned 150-megawatt Rice Solar Energy Project near Blythe, Calif. — enough solar power for 68,000 homes annually.

That same month, the firm won approval by the Department of the Interior to build its 110-megawatt Crescent Dunes Solar Energy project on federal lands in Nevada. State utility NV Energy had already committed to purchase electricity generated by the plant.

SolarReserve has also received environmental permits from Arizona for its proposed 150-megawatt Crossroads solar thermal power plant and is now looking to sell the potential electricity.

Whalen did not disclose the size of the anticipated DOE loan guarantees for the projects, but said that cumulative investments on the first two solar plants were well in excess of $1 billion.

“We have invested a considerable amount of time, energy and money in bringing these projects forward on the basis of the [DOE] programs that have been set up,” he said.

Not only would solar projects in general lose private investment and green job creation as a result of ending the DOE loan guarantee programs, but states would struggle to meet the clean energy components of their renewable portfolio standards (RPS), he said.

“A substantial quantity of utility-scale projects need to be constructed in order for states with RPS to meet those objectives,” he said. “Although there was significant [solar] growth in 2010, the reality is that a large bulk of those projects have yet to commence construction.”

“Most of these projects have in one fashion or another made applications to the DOE and are counting on those programs being available.”