PROJECT EASY GREEN

Apple has a bigger cash reserve than the U.S. Treasury.  Unemployment remains stubbornly high. Venture capital confidence is low. 

But over the last few months, we've reported on more than $10 billion in various forms of funding going toward solar in the United States from banks, venture capitalists, the DOE, the U.S. Treasury and firms like Google.

If one wants to call it a trend, it looks like we're seeing the onset of solar as a more mainstream investment and perhaps the return of an appetite for tax equity. VCs continue to channel money into solar startups although motivation to invest in early-stage, capital-intensive solar entrants seems to have waned. Utility-scale solar is here in a big way in the U.S. and the multi-gigawatt scale of the U.S. market is going to be as important a global market driver as the German and Italian markets.

Here's a rundown:

Big Billions in Loan Guarantees for First Solar, et al.

The DOE Loan guarantee office provided $4.5 billion in loans to three massive First Solar PV solar farms in California. The awards will allow First Solar to supply approximately 20 million solar panels to the three projects from U.S.-based manufacturing sites. Yes, that's 20 million panels.

Providing First Solar placates the locals, the list includes:

• A conditional commitment for a $680 million loan guarantee to support the Antelope Valley Solar Ranch 1 project
• Conditional commitments for partial loan guarantees of $1.88 billion in loans to support the Desert Sunlight project
• Conditional commitments for partial loan guarantees of $1.93 billion in loans to support the Topaz Solar project.

1366 Technologies received a $150 million loan guarantee offer in June for their method of fabricating silicon solar cells directly from molten silicon, a process that could be cheaper and require less material. Calisolar, FRV, and Cogentrix also received offers for loan guarantees for $275 million, $45.6 million and $90.6 million, respectively. The Cogentrix project is for an Amonix CPV deployment in Alamosa, Colorado.

Google Gets Into the Solar PV Race With SolarCity

Solar City won $280 million in residential solar financing from Google. The fund is SolarCity’s largest project financing fund and the largest residential solar fund created in the U.S. SolarCity has built 15 project funds with seven different partners to finance more than $1.25 billion in solar projects.

Until now, the money has mostly come from the banking industry. "I'm a big believer that corporations and utilities need to get into this space," said Lyndon Rive, the CEO of Solar City, adding, "The top 200 corporations in the U.S. are sitting on more than $1 trillion in cash on their balance sheets."

SolarCity, which closed on additional VC funding in July, is on many people's short list of imminent IPO candidates.

Venture Capital

VCs invested more than $360 million in solar startups in the second quarter — along with another $50 million in July. The largest solar VC deal of late was Suniva, which chose to forego their DOE loan guarantee offer.

Capital Raises From Public Companies

One of the leading CPV players, Soitec, raised a $212 million "capital increase," of which half to two-thirds will be devoted to the CPV efforts of the public firm, according to Hans-Joerg Lerchenmueller of Soitec in a briefing at July's Intersolar tradeshow in San Francisco.

From the DOE, Bank of America, and Prologis. — Project Amp

U.S. Energy Secretary Steven Chu offered a conditional commitment to provide a partial guarantee for a $1.4 billion loan to support the 4-year, $2.6-billion Project Amp.  Supported by funding from the Recovery Act, the solar generation project includes the installation of approximately 733 megawatts of photovoltaic panels, nearly equal to the total amount of PV installed in the U.S. in 2010. 

Project Amp will enable a wide distribution of solar power over approximately 750 existing rooftops owned and managed by Prologis, an owner of 400 million square feet of warehouses across the U.S. NRG Energy is the lead investor for the first phase of the project, which will use at least 90 percent U.S.-sourced components with power sold to Southern California Edison.

Bank of America Corp.'s Bank of America Merrill Lynch is providing $1.4 billion in loans for the massive undertaking, one of the largest financing packages for a U.S. rooftop solar-power project. The financing is part of Bank of America's goal of putting $20 billion of capital into renewable energy and greentech.  

Solar Leasing Funds From SunPower ($105 Million) and Borrego 

SunPower (NASDAQ: SPWRA, SPWRB) and Citi (NYSE: C) announced a new fund for approximately $105 million in residential solar lease projects. SunPower will use the fund to extend its SunPower Lease to customers in eight states. Citi is contributing $80 million to the fund.

Borrego Solar, a designer, installer and financier of grid-tied solar PV systems, closed its latest fund with its partners U.S. Bank and East West Bank to finance new commercial solar energy projects in Massachusetts, New Jersey and California. The latest round of projects brings the total amount of solar financed through the Borrego Solar PPA to more than $100 million in the last 12 months. 
 

CleanPath, a New Type of Renewable Energy Investment Firm

CleanPath closed on a $200 million equity and credit facility to invest in the development and construction of large-scale solar PV projects in North America. The firm plans on managing two revolving facilities to invest over $800 million into more than 1,000 megawatts of large-scale solar PV projects over the next 60 months.

John Balbach, the Managing Director described CleanPath as a renewable energy investment firm which develops, builds and delivers high-quality renewable energy assets to long-term owners. The firm was founded by Matt Cheney and Karin Berardo of MMA Renewable Ventures.

CleanPath will focus on later-stage solar projects that either run out of money, don’t have the right team, or for some reason are unable to deliver on their solar PPA deals. Balbach said that the firm is a blend of development with financing but not an IPP.

Tessera Solar is/was the dedicated development arm for Stirling Energy Systems, a system manufacturer for dish-engine solar plants. Tessera had developed the Imperial Project, a 709-megawatt plant with a Power Purchase Agreement (PPA) from SDG&E for 300 MW utilizing Stirling Engine technology. 

In February, Tessera Solar announced that AES Solar, a joint venture between AES and Riverstone Holdings, had acquired the Imperial Valley Solar Project. AES Solar intended to move the project forward to fulfill its obligations under the PPA.  

But not as a CSP project.

The letter, reprinted below, makes it official that none of the Stirling Solar technology will remain as part of the PPA. It will all switch to PV.  

This illustrates the challenge of bringing an innovative, new CSP solution to market when more bankable PV or CSP architectures like troughs or power towers are available. (GTM Research's recent CSP report delves into this issue in detail.)

The nail in the coffin was Tessera's inability to secure a loan guarantee like their CSP competitors BrightSource Energy, Abengoa, or Solar Reserve.

The overall state of the U.S. utility-scale solar market remains healthy. It is true that some CSP projects are being canceled or changed to PV, but there are also several CSP mega-projects that have secured financing and are now beginning construction (e.g., BrightSource's 392-megawatt Ivanpah project and Abengoa's 280-megawatt Solana project). Numerous utility-scale PV projects are also moving forward, too. There are over 13,000 megawatts of utility solar projects with signed PPAs (half are CSP, half are PV).

GTM Research forecasts the CSP market to grow from $3 billion in 2011 to over $10 billion by 2013. But beyond 2013, the situation is much less rosy. With 2011 installations slated to reach 472 megawatts and 2013 forecasted to exceed 2,000 megawatts, the first wave of global project commissionings brings optimism. However, this optimism will increasingly be mitigated by the competitive, long-term threat posed by solar PV, which continues to reduce its installed cost faster than CSP.

Several important questions remain.

1. SCE actually terminated/canceled its PPA with Tessera/SES for the Calico project (which is now owned by K Road). Is there any chance SDG&E will follow suit and terminate the PPA it signed for Imperial Valley? 
2. The CPUC approved the PPA for Imperial when it was a solar thermal plant. Will that decision need to be revisited?
3. The PPA was signed at a price that should have worked if SES could produce systems for $3/W-ac.  If AES is going to use flat-plate PV at $4/W-ac ($3.40/W-dc), will the PPA price still work — or will they need to ask SDG&E for a modification?
4. Is there a chance that AES could end up using concentrating PV (CPV) for this project? SDG&E seems to have a lot of affection for CPV of late.

For more on CPV, tune into GTM Research's CPV webinar on Thursday at 1 pm ET.

And feel free to chime in if you have an answer to these questions.

Below is the letter, dated May 24, which moves the now-PV project out from the jurisdiction of the California Energy Commission (CEC).

The Solar Energy Industries Association (SEIA) hosted a press teleconference today to discuss an emerging trend in the utility-scale solar market toward diversifying solar technologies in utility-scale power plants. But the call strayed from the diversification topic and addressed some of the major issues confronting the U.S. market in 2011.

Jobs, Jobs, Jobs

Rhone Resch, President of SEIA, said that the solar industry employs 100,000 Americans and that that number could double in the next two years. Within a few years, the U.S. will be the world's largest solar market, according to SEIA.

1603 Tax Grant Program and Solar

Resch said that the 1603 tax grant program has filled the void in the collapse of the tax equity market and that the grant program has doubled the efficiency of the Investment Tax Credit (ITC). He remarked that it is scheduled to expire despite the tax equity market not having fully recovered. (The 1603 program provides a 30 percent grant in lieu of the tax credit.)

Resch said, "We have found it to be absolutely critical in the last two years." Resch added that SEIA wants the1603 program extended through 2016 "so we have business certainty. We've found that the 1603 program is an extremely efficient policy for job creation." In the last two years, the solar industry has created 50,000 jobs, according to Resch, adding that the U.S. market will double from 1 gigawatt in 2010 to 2 gigawatts in 2011 and could possibly double again if the tax credit is extended.

This is the kind of policy that yields huge results, creates jobs and doesn't have an enormous impact on taxpayers, according to Resch.

Extension of 1603 is the number-one priority of SEIA and they are working with Republicans and Democrats on the issue. SEIA thinks it has a good chance of extending the program — and instead of extending it for one year, the group would prefer to see "it ingrained in the tax code through 2016."  The 2012 Obama budget does have an extension of the TGP for one more year, according to Resch.

Resch added that 1603 is "simply the most important policy for continuing renewable energy growth in the U.S." The 1603 grant provision was actually passed during the Bush Administration.

It's not just large-scale solar that will feel the pain if 1603 expires. Tax equity and grants are what keeps solar residential financing companies like SolarCity, SunRun and Sungevity in business. 

According to law firm K&L Gates, "The 1603 Treasury Grant Program is dead after 2011. There won't be an extension." That information was reported by Ed Gunther while attending a GABA event.

Pushback From the Environmental Community on the Solar "Land-Grab"

Large-scale solar farms on public lands have pitted environmentalists against solar developers, with a bit of help from media amplification. And tortoises.

Resch notes that the oil and gas industry has received 74,000 permits for drilling on public lands over the last century, while the solar industry has received nine permits to build on public lands. "There is no land grab," said Resch, adding, "The EIR [environmental impact report] to study these areas has been comprehensive."

Resch also notes that 75 percent of the U.S. public support locating solar on public land instead of using it for grazing or other uses.

Technological Diversification, etc.

Arizona wants to be a leader in solar. (In 2010, Arizona was the fourth largest state market for solar with 55 megawatts of solar installed.) But that is certainly set to change.

Pat Dinkel, VP of Resource Planning, Arizona Public Service spoke of the Solana solar trough plant — an Abengoa project with a U.S. DOE loan guarantee, the $500 million, 100 megawatt Arizona Sun project and the plan for Gila Bend to be the solar capital of the world.

In addition to those large projects, APS is working on a number of projects in the 15-megawatt to 20-megawatt range using c-Si panels on trackers or CdTe on fixed mounts. 

Tom Georgis, Senior VP of SolarReserve, spoke of the Crescent Dune project (which is backed with a loan guarantee) and the Rice project (which is currently going through the loan guarantee process). Georgis restated the need for clarity and certainty around policy in order to attract project and corporate capital.

Jim Stein, VP of Government Affairs, Schott North America, does qualify as a diverse supplier, as the company manufactures PV panels as well as CSP tubes. The firm has nine manufacturing sites in the U.S. and a flagship Albuquerque solar facility employing over 300 people and looking to expand to a workforce of 1,500 in the near future.