It wasn’t so long ago that solar firms were worried they might lose funds to their counterparts in the wind industry when it came to divvying up the stimulus package. But as key programs from the stimulus package draw to a close, the score card shows that while solar gets more loan guarantees, wind projects get more cash grants, which offset 30 percent of a project’s cost.
The results reflect the maturity of the two technologies as well as the designs of the federal aid programs that seek to boost job growth via clean power. The cash grant program, run by the U.S. Department of Treasury, doled out large awards going quickly to big wind farm projects in the early days of the program’s deployment. Energy giant Iberdrola was a big beneficiary.
The story is different with the loan guarantee program that is commonly referred to as the Section 1705 program. Solar projects have been big winners, particularly large solar farms that are set to rise in sunny and arid regions of California and other southwestern states. The U.S. Department of Energy announced not one, but two more loan guarantees for solar projects yesterday. The DOE offered a $1.2 billion loan guarantee to Abengoa Solar for the 250 MW Mojave Solar project in California. The DOE also offered a $681.6 million loan guarantee for a 250 MW project being developed by NextEra Energy Resources. The guarantees reflect the amount the government promises to pay lenders if borrowers can’t.
The latest loan guarantee offerings for solar bring the total amount offered by the DOE for solar projects to about $10.06 billion, which is spread among 10 solar farms with a total generation capacity of more than 23 GW. In comparison, only three wind farms totaling 925 MW have collectively been offered $1.52 billion from the same program, according to the DOE website. Other sources of renewable energy generation, such as geothermal, don’t come even close.
Wind projects have continued to draw more money from the cash grant program than solar. An ongoing tally of the cash grants by the Solar Energy Industries Association shows that, as of May 5 this year, 295 wind power plants had received a total of $5.61 billion. On the solar side, 2184 projects had gotten $936 million. California enjoyed the biggest share in solar: $277.4 million for 329 projects. Texas, long-reigning as the wind capital of the country, grabbed $1.4 billion for 19 projects.
Renewable energy power plant developers love the grant program, because it’s more or less an equal opportunity jackpot from which cold hard cash flows. The program mainly requires project developers to show they have installed and are receiving power from the projects – however large or small – before the program expires (in some cases, they just have to start construction by a certain date). It doesn’t distinguish between old or new renewable energy technologies.
Wind project developers have been particularly good at nabbing grants partly because they’ve been in the business much longer than solar project developers and are able to put together projects more quickly. In addition, they tend to be able to attract private investors more readily, as wind technology tends to be less risky than solar technology.
Renewable electricity accounted for 10 percent of the nation’s electricity production in 2009, and wind made up 17 percent of that, according to the latest data available from the U.S. Energy Information Administration. At 0.2 percent, solar took up the smallest portion. Wind electricity production grew faster than any other renewable electricity sources in recent years: 61 percent between 2007 and 2008 and 28 percent between 2008 and 2009.
Loan guarantees are a more arduous process than receiving the cash grants. Loan guarantees requires a lengthier application process, which includes assembling debt and equity from private and public sources. Private lenders already are shy about investing in new technologies, so raising money is a lot tougher for solar project developers than their peers in the wind market. The loan guarantee program largely sets out to help fund newer technologies, and solar fits that definition more than wind.
Among the solar projects that have received loan guarantee offers, those that use mirrors to concentrate sunlight for producing steam to run electricity generators have gotten more money than ones using solar panels, which is a far more common technology in the marketplace. Six of the 10 solar projects, including the most recently announced two, use concentrating solar power equipment and have garnered over two-thirds of the guaranteed amount for solar. Concentrating solar is a riskier technology than solar panels.
The cash grant program is set to end on Dec. 31 this year, and efforts are underway to call for its renewal. The loan guarantee program will end on Sept. 30 this year. The DOE has another loan guarantee program, commonly called Section 1703, that will continue, though this one is targeting novel technologies only and its terms aren’t as generous as Section 1705.
Convincing lawmakers to set aside more money for renewable energy won’t be so easy given the political climate, in which Republicans are pushing for cuts and see some aspects of the stimulus programs as expensive and unnecessary. History will remember this period as a renaissance for renewable energy generation. But how long this renaissance will last remains to be seen.
Photo courtesy of Solar Millennium