DOE helps “guarantee” future for solar

David Feldman's picture

The Department of Energy’s Loan Guarantee Program has been a big supporter of solar energy.  As of July 1st, of the $20.5 billion in conditional or finalized loan guarantees, $17.7B has gone to solar projects.  Of that, $8.5B has gone to supporting nine solar electric generating projects, which constitutes over 2.8 GWAC of installed capacity.  In addition, $1.5B has gone to five PV manufacturing projects, which constitutes over 2.4 GWDC of PV production capacity and 16,000 metric tons of capacity for silicon for PV, annually. 

This support is helping to commercially deploy new and innovative technologies and techniques.  One of the “largest” of these techniques is installing large systems.  As of August 1st, 2011, the biggest PV system in the U.S. is 48 MWAC, and there are only four systems larger than 20 MWAC.  Currently all of the projects under construction that are larger than 50 MWAC have received a loan guarantee.  Compare that to the seven PV projects which have received conditional loan guarantees, averaging around 290 MWAC of capacity (this average excludes a 30 MWAC CPV project, and a 733 MWAC portfolio of projects spread over 42 states) and you can see the order of magnitude difference with which the loan program projects are dealing. 

But these projects would not just be market leaders in the U.S., according to the website pvresources.com Two construction workers consult in the middle of a ground-mounted PV array. there are no PV projects in the world larger than 100 MW and only eight PV projects above 50 MW.  Two of the largest PV loan guarantee projects (from First Solar) will have a capacity of 550 MWAC each; over five times larger than the largest PV system ever built.  There are projects which have been discussed in North Africa and Inner Mongolia China, which would be of this size; however, no ground has been broken and the transmission infrastructure must first be put in place.  The PV projects supported through the DOE loan program will help establish the U.S. as the leader in large-scale solar.

These projects will also help work-through issues that have never been addressed for PV projects.  Building and connecting solar projects of this scale presents unique challenges, such as impact on grid stability and transmission, environmental concerns, scaling, financing, and long-term planning.  Through deployment led by domestic firms, the U.S. will gain unparalleled experience and have a better understanding of what is required to make projects of this size viable.  At the end of this month (September 2011), Section 1705 of the loan program ends.  Assuming that loan guarantees are not provided for these types of projects in the future (due to the government not funding the credit subsidy cost), these projects will help inform whether it makes economic sense for developers, financiers and utilities to focus on bringing these large projects into service.  If these projects prove their merit, then loan guarantees will likely not be needed in the future to compensate for the perceived additional risk; likewise, these projects may in fact prove that it makes more sense for the industry to focus on smaller projects that may be less complex and lower risk.

However, the Loan Program is not just helping solar through supporting domestic generating assets, they are also providing loans to the solar manufacturing sector as well.  Although most of the worldwide PV manufacturing capacity has shifted to China and other Asian nations, the U.S. is still a net exporter of PV modules & cells.  According to reports by GTM Research and Navigant Consulting, although the U.S. installed 920 MW of PV capacity in 2010, we actually produced 1,067 MW.  With the help of the 2.4 GWDC of manufacturing capacity to be added through projects supported by the Loan Program, as well as additional capacity supported through the Manufacturing Tax Credit (48c, which provides a 30% tax credit on the cost of the manufacturing facility), the U.S. manufacturing base should continue to grow.  However, with some industry experts predicting annual U.S. PV installations of 5-6 GW, it is unclear whether the manufacturing base will continue to keep pace with domestic installations. 

The DOE Loan Program is assisting the supply & demand of PV in the U.S. in a very big way.  With the help of these projects the U.S. solar industry will experience tremendous growth over the next few years, and with it, the maturity to get project capital from the markets at reasonable rates without government guarantees.