Company returns fed loan

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autoxsteve Solar Expert Posts: 114 ✭✭✭✭
Solar Developer Says No Thanks to $2.1 Billion Federal Loan Guarantee

In April, the Obama administration offered German developer Solar Millennium’s U.S. joint venture a $2.1 billion loan guarantee to build a massive solar thermal power plant in the California desert. On Thursday, the company effectively gave the money back.

The joint venture, Solar Trust of America, has decided to ditch Solar Millennium’s tried-and-true solar trough technology and seek commercial financing to build the first 500-megawatt phase of the Blythe Solar Power Project with photovoltaic panels like those found on residential rooftops. Solar trough technology uses long rows of parabolic mirrors to heat tubes of liquid suspended over the arrays to produce steam that drives an electricity-generating turbine.

"Solar Millennium responds quickly and pragmatically to market conditions, and at the moment the California market favors PV technology," Christoph Wolff, Solar Millennium’s chief executive, said in a statement.

In a sign of how the economics of solar power are changing, Solar Millennium indicated it would be easier and more profitable to obtain commercial financing for the photovoltaic portion of the Blythe project rather than try to attract equity investors for a solar thermal project underwritten by the federal government. Last year, California regulators and the Obama administration rushed to approve nine big solar thermal projects, fearing they would not get built unless the developers obtained billions of dollars in federal loan guarantees.

Over the past two years, however, prices of photovoltaic panels have plunged by 50%, making it increasingly attractive to deploy them by the hundreds of thousands to generate electricity on solar farms that can occupy five square miles or more.

“While Solar Millennium remains the international leader in concentrating solar power technology, the company cited favorable conditions in the PV and commercial lending markets in the United States as the main driver for the decision,” Solar Millennium said in a statement.


There are drawbacks to photovoltaic farms. Solar panels are less efficient at converting sunlight into electricity than solar thermal plants and clouds can interrupt power generation. There also is no economically viable way currently to store the electricity produced bya photovoltaic farm. On the other hand, solar thermal power plants like those being built by BrightSource Energy and SolarReserve can store heat from the sun in molten salt, releasing it to generate steam and electricity at night or after sunset.

Still, developers of seven big renewable energy projects in California have switched from solar thermal technology to photovoltaics in recent months. In June, Solar Millennium’s Solar Trust of America told California regulators that it was planning to redesign its 250-megawattt Ridgecrest project as a photovoltaic farm.

The move followed Solar Trust’s announcement in May of a partnership with a photovoltaic developer. In an interview with Forbes, Solar Trust’s chief executive, Uwe T. Schmidt, said at the time that the company was considering replacing a number of its solar thermal projects in the U.S. with solar panels.

Brett Prior, a senior analyst with GTM Research, said he expected that trend to continue.

“The economics of PV are much better,” he said. “It means that trough without storage in the U.S. is not competitive economically. You are going to see a bunch of those projects revisit their plans.”

We should be celebrating this decision!