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Posts Tagged ‘stimulus package’

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photo: SolFocus

Silicon Valley solar power company SolFocus on Monday said it has signed a deal to install 10 megawatts of concentrating photovoltaic panels in Greece and expects to build its first project in the United States later this year.

SolFocus’ solar panels use small curved mirrors to focus sunlight on a high-efficiency solar cell to maximize production of electricity while reducing the use of expensive silicon. SolFocus claims its panels are up to twice as efficient as conventional photovoltaics. But given the relatively high costs of such systems, the company decamped for Europe where governments in Spain and Greece pay a premium rate for solar energy through “feed-in tariffs.”

But the recently enacted federal economic stimulus package, which includes billions of dollars dedicated to renewable energy projects, is luring SolFocus home.

“Now with the new stimulus package we believe the big year for us in the U.S. will be 2010,” Nancy Hartsoch, SolFocus’ vice president of corporate marketing, told Green Wombat.

Meanwhile, utilities are ramping up installations of photovoltaic solar projects. California utility PG&E (PCG) two weeks ago, for instance, unveiled a program to install 500 megawatts of ground-mounted solar panels over the next five years. The projects would essentially be small-scale solar farms generating between one and 20 megawatts of electricity and built on utility-owned land near substations.

“That‘s the perfect spot for our technology,” says Hartsoch.

Not so perfect is PG&E’s Northern California territory. SolFocus’ power plants need direct sunlight to most efficiently produce electricity. But Hartsoch says the southern reaches of PG&E’s service area offer sufficient sunlight and as production costs fall it’ll become cost effective by 2012 to build concentrating photovoltaic power plants in Silicon Valley and elsewhere in Northern California.

She says SolFocus’ first solar farms will likely be built for municipal-owned utilities and the company currently is in discussions with cities in the Southwest.

The deal announced Monday with Greece’s Samaras Group expands a 1.6 megawatt agreement the companies signed last year.

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topaz-solar-farm-app

In the green stimulus sweepstakes, big potential winners are companies like Silicon Valley startup OptiSolar.

The solar-cell maker came out of nowhere last year to score a deal with utility PG&E to build the world’s largest photovolaic power plant, a 550-megawatt monster that would cover some 9 1/2 square miles on California’s central coast. OptiSolar subsequently began construction of a factory in Sacramento to produce the thousands of thin-film solar panels needed for the project. Then the economy tanked and as financing dried up, OptiSolar laid off half its workforce – some 300 employees – and halted construction of the Sacramento facility.

With a Colorado solar company executive joining President Barack Obama as he signed the $787 billion stimulus legislation into law Tuesday at a solar-powered museum in Denver, OptiSolar and other renewable energy companies stalled by the financial crisis may see their fortunes revive. The package allows builders of big renewable energy projects to apply for a government cash grant to cover 30% of construction costs in lieu of claiming a 30% investment tax credit. A dearth of investors who finance solar power plants and wind farms in exchange for the tax credits has put in jeopardy green energy projects planned for the desert Southwest and the Great Plains. The cash grant would shave about $300 million off the projected $1 billion price tag for OptiSolar’s Topaz Solar Farm.

The stimulus package also includes $2.3 billion to fund a 30% manufacturing tax credit for equipment used to make components for green energy projects, a provision OptiSolar can tap to help finance its solar cell factories. And the company may be able to take advantage of the legislation’s government loan guarantees for large renewable energy projects.

“It will lower the cost of the factory we’re building in Sacramento and make it easier to attract financing,” OptiSolar spokesman Alan Bernheimer told Green Wombat, noting the company’s priority is to complete the facility and begin production of solar panels. “The factory is more than shovel ready – our shovels are hanging on the wall where we put them when we had stop work in November.” (OptiSolar currently manufactures solar modules at its Hayward, Calif., plant.)

Fred Morse, senior adviser to Spanish solar energy giant Abengoa, says the stimulus package puts back on track a $1 billion, 280-megawatt solar thermal power plant the company will build outside Phoenix to produce electricity for utility Arizona Public Service. “With the stimulus bill we’re very confident we’ll be able to finance the project,” says Morse. He says Abengoa expects to use the government loan guarantees to obtain debt financing to fund construction of the project and then apply for the 30% cash refund. “I think the entire industry is very optimistic that these two aspects of the stimulus package, the grants and the temporary loan guarantees, should allow a lot of projects to be built.”

Mark McLanahan, senior vice president of corporate development for MMA Renewable Ventures, agrees. “I expect the government grants to attract new investors,” says McLanahan, whose San Francisco firm finances and owns commercial and utility-scale solar projects.

There are some strings attached, though.

To qualify for the cash grants, developers need to start shoveling dirt by Dec. 31, 2010. That means only a handful of big solar thermal power plants planned for California, for instance, are likely to make it through a complicated two-year licensing process in time to break ground by the deadline. One of those could be the first phase of BrightSource Energy’s 400-megawatt Ivanpah power plant on the California-Nevada border. But BrightSource’s biggest projects, part of a 1,300 megawatt deal signed with Southern California Edison (EIX) last week, won’t start coming online until 2013 at the earliest.

Another Big Solar project, Stirling Energy Systems’ 750-megawatt solar dish farm for San Diego Gas & Electric (SRE), will be racing to meet the 2010 deadline. The project is in the middle of a long environmental review by the California Energy Commission and the U.S. Bureau of Land Management which currently is scheduled to stretch into 2010.

SolarReserve CEO Terry Murphy says his Santa Monica-based startup has a couple of solar power plant projects in the works that should be able to take advantage of the stimulus provisions. “The likelihood of us being able to close on a financial deal has increased,” Murphy says.

Solar analyst Nathan Bullard of research firm New Energy Finance expects the stimulus package to prompt a push for large photovoltaic power projects. That’s because in California such solar farms – which essentially take rooftop solar panels and mount them in huge arrays on the ground – do not need approval from the California Energy Commission and can be built relatively quickly.

That’s good news for companies like thin-film solar cell maker First Solar (FSLR), which builds smaller scale photovoltaic power plants, and SunPower (SPWRA), which has a long-term contract with PG&E (PCG) for the electricity generated from a planned 250-megawatt PV solar farm to be built near OptiSolar’s project.

“It’s great for PV because you can definitely can get construction done by the end of 2010,” says Bullard. “It’s also good news for smaller and mid-sized developers who couldn’t access tax-equity financing.”

The catch, however, is that renewable energy companies still must raise money from investors in a credit-crunched market to cover construction costs, as the government doesn’t pay out the cash until 60 days after a solar power plant or wind farm goes online. And as McLanahan points out, the cost of raising capital from private equity investors is typically higher and will add to the cost of renewable energy projects. Those costs will only rise if the government is late in paying out refunds.

MMA Renewable finances large commercial arrays and solar power plants and then sells the electricity under long-term contracts to customers who host the solar systems. The loan guarantee provision of the stimulus legislation will help secure financing from investors skittish that some of MMA Renewable’s customers may default on their agreements, according to McLanahan.

Says Murphy: “The fact that we’re getting iron into the ground and getting things moving helps us.”

The wind industry also stands to gain from the stimulus package through a three-year extension of the production tax credit for generating renewable electricity as well as the government cash grants and manufacturing tax credit. Despite a record year for wind farm construction in 2008, projects have come to a standstill in recent months as the financial crisis froze development and forced the European-dominated industry to lay off workers.

“I think it’s good down payment on what needs to happen,” says Doug Pertz, CEO of Clipper Windpower, one of two U.S. wind turbine makers. “A lot more needs to be done but I think this will start to bring a lot of people back into the marketplace.”

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stirling-dishes

photo: Todd Woody

Fifty-four billion dollars is nothing to sneeze at, of course. That’s the amount in the $825 billion economic stimulus package –  introduced by House Democrats Thursday – set aside for renewable energy, electric car batteries, energy efficiency and other green projects.

It’s a start, but that’s less than 7% of the entire stimulus package (or, about enough to pay for the Iraq war for five months, or somewhat more than what the federal government is spending to bail out Bank of America). The lion’s share of the cash is devoted to smart grid technology and transmission lines, with a second big chunk going toward energy efficiency retrofits of public housing and weatherization of low-income homes.

That’s good news for a host of startups developing smart grid technology. But the the bill does not address the most pressing issue facing renewable energy companies today: the credit crunch has dried up financing just as billions are needed to fund factories and the construction of solar power plants and wind farms that will be connected to smart grids and new transmission lines. In recent weeks, layoffs have hit the solar industry. OptiSolar – a Bay Area thin-film solar startup that’s building a 550-megawatt photovoltaic power plant to supply electricity to utility PG&E (PCG) – reported to have furloughed half its workforce. And according to The Oregonian newspaper,  SpectraWatt, a solar cell maker spun off from chip giant Intel (INTC) last year, has shelved plans for a factory in Hillsboro, Ore.  Friday morning, Kate Galbraith at The New York Times’ Green Inc. blog reported that layoffs have now hit the wind industry.

The retrenchment comes as utilities are counting on solar power plants and wind farms to come online in the next two years to help them meet mandates to obtain a growing percentage of the electricity they sell from renewable sources. In California, for instance, PG&E, Southern California Edison (EIX) and San Diego Gas & Electric (SRE) have signed more than four gigawatts’ worth of contracts for electricity to be produced by large-scale solar power stations that will cost billions to build.

Solar startups rely on a provision that allows them to take a 30% tax credit on the cost of building a power plant. Now most of these companies are startups and have no way to use those tax credits as they’re not profitable. Instead, a solar company must essentially trade the tax credits to a firm that can use them in exchange for cash to finance construction. But investors in these deals have all but disappeared as the financial crisis takes its toll. Which is why solar and wind lobbyists are pushing Congress to make the tax credits “refundable” – meaning those companies that don’t have tax liabilities can trade the credits for cash that can be used to finance power plants. “Due to the recession, projects are now being put on hold, factories are closing and workers face potential layoffs unless Congress refines the tax credits now so they work as originally intended,” said Solar Energy Industries Association CEO Rhone Resch in a statement.

The stimulus package unveiled Thursday undoubtedly will be subject to change, but as written it will boost efforts to modernize and digitize the United States’ aging analog power grid. The bill includes:

  • $11 billion for smart grid research and development, pilot projects and the construction of new transmission lines to connect green energy power plants to the power grid. The government will fund 50% of the cost of utilities’ smart grid investments.
  • $8 billion in loan guarantees for renewable energy transmission projects.
  • $6.9 billion in grants to state and local governments for energy efficiency and carbon reduction programs.
  • $6.7 billion for renovation of federal buildings, of which $6 billion must be used for energy efficiency retrofits.
  • $6.2 billion for home weatherization programs for low-income families.
  • $2.5 billion for energy efficiency retrofits of public housing.
  • $2.4 billion for carbon sequestration – so-called clean coal – demonstration projects.
  • $2 billion for energy efficiency and renewable energy research (which includes $800 million for biomass and $400 million for geothermal research).
  • $2 billion in loan guarantees and grants for advanced vehicle battery research.

The smart grid billions will be a boon to companies like Silver Spring Networks, Gridpoint and eMeter that develop software to allow utilities to monitor and manage electricity use in real-time and provide that data to their customers.  “We think 2009 is going to be a good year for us,” eMeter president Larsh M. Johnson told Green Wombat last month. “We’ve seen continued demand from utilities for our services.”

But the billions for the smart grid can be considered a down payment: According to an estimate by research firm New Energy Finance, the price tag for modernizing the power grid over the next 15 years will be $450 billion.

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