The road is long & hard for giant solar farms

Solarthermische Parabolrinnenkraftwerke Andasol 1 und 2

Around this time last year, California and federal regulators were busy reviewing and signing off on close to a dozen giant solar farms planned for California’s and Nevada’s deserts. Eventually, between them they would approve nine in California and several more in Nevada within a few months in 2010.

You would think that the speedy approval process should’ve invited more proposals, but it hasn’t. And now with uncertainty about federal solar funding looming and the economy remaining weak, the pace for building these first giant solar farms in decades could slow down as well. So far this year, the California Energy Commission, which oversees solar thermal power plants that are 50 MW or larger, has received only one new solar thermal power plant application. That application came from BrightSource Energy, which is seeking to build a 540 MW project in Inyo County.

As I pointed out last December, mega solar farms  — because of their size and land-use choice – will likely always face difficult hurdles in securing permits and financing. All but two of the nine solar projects approved by the California Energy Commission last year proposed using mirrors to harness the sun’s heat to generate steam, which is then piped to run turbines to produce electricity. The remaining two also plan to use mirrors to capture the thermal energy, but that energy would heat up hydrogen gas to run 4-cylinder engines, which would then drive the turbines.

All these so-called concentrating solar thermal power plants require a lot of land because they are hundreds of megawatts in size each, and building them at a smaller size just wouldn’t be economically feasible. Many of these huge plants also are destined for public lands, and that triggers an additional environmental review from federal agencies. They also are set to materialize in remote regions where more wildlife roams. Fierce fights over these projects’ environmental impact have attracted lawsuits against both federal and state governments.

Large solar farms that plan to use solar panels (photovoltaic, or PV, technology) aren’t having an easier time. First Solar and SunPower recently announced a peace treaty with environmental groups in order to avoid legal challenges from them over their projects in San Luis Obispo County in California.

Need for speed

Both California and federal regulators made it clear last year that they were eager to approve these solar farms so that the project developers could qualify for a federal program that doles out enough money to offset 30 percent of a project’s cost. That Treasury program, typically called Section 1603, was set to expire on Dec. 31, 2010. But then, last-minute politicking extended it for another year. 

The same program is set to end this year, and solar industry advocates once again hope for another reprieve. But fighting for the program’s survival could be tougher this year because the Republicans, since taking control of the House, have been keen on enacting large spending cuts and opposing programs dear to the Democrats. Another federal program that over the past two years has offered billions of dollars in loan guarantees to help build solar farms will end this year as well, and chances of keeping this program around are even slimmer.

Those two federal programs came out of the 2009 stimulus package and are meant to be short-term solutions. Many people were hoping and even expecting the economy would improve significantly by now. But the recent wild swings in the stock markets worldwide sure aren’t making people feel like the worse is over.

Successes and potential failures

Many of the solar farms approved last year haven’t started construction. Some are finalizing their federal loan guarantees, which require them to secure private money as well. And if they don’t have loan guarantee offers in hand, then they will likely find it even tougher to convince banks and other investors to pony up the money – billions of dollars in some cases – to build their projects.

Lining up construction money for solar thermal power plants will be particularly difficult for some projects, said Brett Prior, a senior analyst at GTM Research. Some developers are realizing that their power plants could deliver higher returns to their investors if they use solar panels instead.

Two key reasons have led to this epiphany: solar panel prices have fallen by more than 50 percent in the past two years and a particular type of solar thermal technology that has been proposed for use in several projects generally can’t produce electricity as cheaply, Prior said. This solar thermal technology uses curved mirrors and typically doesn’t produce as much electricity as the same-sized projects that use newer technologies such as the power tower design by BrightSource, he added.

That seems to be the case with the 1,000 MW  Blythe Solar Project in California. Blythe’s developer, Solar Trust of America, announced Thursday that it would use solar panels for the first 500 MW of the project instead. The decision is surprising because Solar Trust already received a $2.1 billion federal loan guarantee to help pay for the first 500 MW of the project. Even with the government help, Solar Trust probably still had a hard time lining up the required private money to pay for the rest of the project because potential investors didn’t think they would make good returns, Prior said. Solar Trust’s vice president of external affairs, Edward Sullivan, told me that the company will forgo the loan guarantee and seek private financing only because money for PV projects is readily available.

Other developers of solar farms in California have announced plans to switch from solar thermal to PV, including the Calico Solar Project and the Imperial Valley Solar Project. NRG, which has invested in a solar thermal power plant by BrightSource Energy, replaced two solar thermal power plant projects in favor of using solar panels.

Solar Trust also plans to use solar panels for its 250 MW Ridgecrest Solar Power Project in California, though the chief reason for that change is to minimize the amount of land needed in order to minimize the project’s impact on the wildlife.

A few that have successfully lined up money to start construction of solar thermal power plants include BrightSource and Abengoa Solar. These companies also have other approved projects that have yet to secure all the necessary funds. BrightSource, in particular, is preparing for an initial public offering to raise more money.

California and other states are requiring their utilities to increase the amount of solar electricity they sell to customers. Solar farms are necessary to meet these goals. Because of their economies of scale, large projects tend to produce cheaper solar electricity. But larger projects by their nature often need lengthier regulatory review and big loans. Given that public subsidies remain important for these projects, the path to building them could just get much longer.

Images courtesy of Solar Millennium, BrightSource Energy and Abengoa Solar

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