DOE mounts defense of contentious loan program

Source: Christa Marshall, E&E reporter • Posted: Wednesday, October 19, 2016

The Department of Energy is pushing back against critics who say its loan program office spawned useless renewable spending and led to bankruptcy flops like Solyndra.

In a new report, DOE notes its loan guarantee office supported the first five utility-scale solar projects in the United States larger than 100 megawatts. When Obama took office, there were no large-scale solar photovoltaics projects of that size in the United States. That initial financing “demonstrated the technology’s success” and fostered a private market, according to DOE.

DOE issued more than $4.6 billion in guarantees to those initial solar projects, which included large now-completed utility projects in California and Arizona.

After that, private financing spawned a tenfold increase in utility-scale solar projects, including the 150-MW Mesquite Solar 3 PV project in Arizona, which was dedicated Friday, DOE said. It will provide power to 14 Navy and Marine installations in California.

Mesquite Solar 3 is linked with the earlier 170-MW Mesquite Solar 1 project, which receive a $337 million DOE loan guarantee as one of the “first five.” Mesquite Solar 1 was completed in June 2013.

“Mesquite Solar 1 and 3 exemplify how the Energy Department provides early crucial early financing and technical support to demonstrate cutting-edge projects at commercial scale to support new markets, work with lenders and provide confidence to investors so the department can then step aside to let industry take over,” Energy Secretary Ernest Moniz said in a statement.

It’s a very different vision of the loan program than that presented by some lawmakers. At a March congressional hearing, for example, GOP lawmakers slammed loan-guarantee recipients Solyndra, a solar company that went bankrupt in 2011, and Abengoa SA, which filed for bankruptcy earlier this year (E&E Daily, March 4).

Many of the initial loans for renewables came under the 1705 program authorized by the Recovery Act. The program stopped issuing new loan guarantees in 2011.

The latest DOE numbers are an update to a 2015 report on the loan program that found initial growth in the solar industry was expanding beyond the U.S. Southwest to Indiana, Rhode Island and other states. In 2014, DOE reported the loan program was on path to make a profit (Greenwire, Nov. 13, 2014).

However, some analysts say that the loan guarantee program was not needed for development of a large-scale utility PV financing market. A market blossomed in plenty of countries that didn’t provide government loan guarantees, said Jenny Chase, an analyst at Bloomberg New Energy Finance.

Large PV projects “are not particularly risky and have already been pretty well-tested in smaller chunks and in Europe, and in the low interest rate environment of the past five years, would have been financed anyway. The main driver has been the crash in prices for photovoltaics since 2008, which made the economics of large-scale PV work,” said Chase.

Yet DOE’s loan guarantee program was critical for high-risk projects testing new technology, she said. That would include large solar thermal projects like Ivanpah, which has been an “important trial” of solar technology and likely would not have moved forward without DOE loan guarantee financing, she said.

BrightSource’s Ivanpah Solar Electric Generating System in the Mojave Desert is currently the largest solar thermal power plant in the world.

On a certain level, DOE officials are in a difficult public position, according to Chase.

“If they made a good investment, everyone will say it would have happened anyway, while if they took a risk the market wouldn’t take and lose, they are blamed for it,” Chase said.