And then there were 10. The Department of Energy this morning announced the tenth award for a clean energy project under the long delayed loan guarantee program. Oregon-based U.S. Geothermal has won the latest award, on a conditional basis, for $102.2 million. The funds are meant to support construction of a 22-megawatt power plant at Neal Hot Springs in southeastern Oregon’s Malheur County.
This latest award comes a little more than a year after the DOE announced the first conditional award — $535 million for solar startup Solyndra — through a program created under the Energy Policy Act of 2005. Startup BrightSource Energy scored a conditional commitment for a whopping $1.37 billion guarantee in February for its Ivanpah solar thermal project.
U.S. Geothermal’s project is set to deploy a technology called “supercritical binary geothermal cycle,” which the DOE says offers a more efficient method for extracting thermal energy from hot water found deep below the Earth’s surface, compared to typical binary geothermal power projects. “As a result,” the DOE explained Thursday, “more energy can be extracted from existing sites in addition to new sites that previously would not have been considered for geothermal projects.”
U.S. Geothermal expects the project to create 150 jobs during 20 months that Houston, Tex.-based TAS Energy set to build the plant, and 10 jobs for full-time skilled workers when it comes online in 2012. The bulk of parts and infrastructure for the plant — as much as 95 percent — will be built stateside by U.S.-based manufacturers, according to U.S. Geothermal.
A loan guarantee essentially serves as promise by the government to back a loan if the company can’t make good on it. It offers a real competitive edge for these companies because it will typically enable them to finance projects with a better interest rate and at a lower cost than would otherwise be available to them.
Geothermal companies in particular are working in a market where Uncle Sam is one of few games in town for project financing. The Geothermal Energy Association reported recently that U.S. geothermal power projects grew 46 percent in 2009, up from about 30 percent in 2008. But while the stimulus package included $400 million for the U.S. Department of Energy’s Geothermal Technologies Program, venture capitalists and private equity investors are still largely keeping this technology at an arms length.
This type of award for U.S. Geothermal also serves as “a critical vote of confidence” from the government, as U.S. Geothermal CEO and President Daniel Kunz put it in a statement today. But it’s not a sure sign of a winning technology. Solyndra, for example, has some of the highest manufacturing and capital factory costs around, and it’s not yet clear how successful Solyndra will be. (Check out Katie’s post questioning whether the loan guarantee for Solyndra was a mistake.)
Jonathan Silver, the former venture capitalist whom the Obama administration tapped to lead the DOE’s loan and loan guarantee programs, told us in an interview recently that the agency is “deliberately not in the business of attempting to select winners and losers.” The goal is to support “big, important technologies that will transform their sector on the energy spectrum,” and to do that Silver said the agency will likely support multiple, competing technologies and companies in the same space.
In addition to having the DOE in its corner, U.S. Geothermal has something else going for it with this project: a ready and waiting customer. The utility Idaho Power Company has agreed to buy up to 25 megawatts of power each year from the U.S. Geothermal project for 25 years. According to U.S. Geothermal, the agreement establishes a flat energy price of $96 per megawatt-hour starting in 2012. Initially the price will increase each year by 6 percent, and toward the end of the 25th-year the annual contract will step-up to be just 1.33 percent. Overall, Idaho Power Company’s agreement with U.S. Geothermal subsidiary USG Oregon delivers a levelized price of about $117.65 per megawatt-hour over the 25 years.
More awards are in the pipeline. Silver told us in late May that the agency expected to make up to four loan guarantees in June.
Photos courtesy of U.S. Geothermal
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