A massive $1.37 billion loan guarantee that the U.S. Department of Energy granted to Brightsource Energy last week could help clear the way for over 15 gigawatts of solar projects in California, and could be the key to launching a new solar thermal industry in the United States.
Solar thermal technology gathers heat from the sun to produce steam and generate electricity. Although it only works in very sunny locations, it could generate electricity at prices competitive with fossil fuels–especially in places where electricity is expensive. And, unlike solar panels that convert sunlight directly into electricity, solar thermal technologies offer relatively inexpensive options for storing energy (in the form of molten salts, for example, which are cheaper than batteries), making it possible to deliver electricity whenever it’s needed.
Solar thermal technology has been around for decades, and in the early 1980s, government incentives encouraged developers to install the first power plants. But when incentives were cut, there was little interest in new projects.
Brightsource’s 400 megawatt Ivanpah solar thermal power plant, first submitted to the California Energy Commission for approval in 2007, is one of a new batch of solar thermal projects that have been proposed as a result of new interest in renewable energy. Ambitious mandates for renewable energy, such as the requirement that 33 percent of electricity in California be renewable by 2020, have helped create demand. But key hurdles have remained, including the permitting process, the need for new transmission lines to carry power from desert locations, and, most importantly, the need to acquire financing for the technology, which is expensive to build, says Charles Ricker, senior vice president for business development at Brightsource.
The DOE’s loan guarantee, and the federal loan it will unlock for the company, will cover most of the approximately $2 billion needed to complete the project. The loan guarantee is the result of an energy bill passed in 2005, although the issuing process has proved very slow, with the first ones granted only last year. Brightsource is the first solar thermal company to get one.
Last year’s stimulus package could help raise the rest of the funding needed. Most importantly, a grant program that covers 30 percent of an investment in solar projects will help the company raise the money not covered by the loan.
Ricker says winning the loan guarantee was a challenge. On the one hand, the deal required that the technology be innovative, not something that was already in commercial production. But on the other, the government–which would be loaning the money–wanted to make sure it wasn’t taking too much of a risk. To prove the technology, Brightsource built a pilot plant in Israel, using full-size components, and has tested it for the past 18 months. The project got a big boost when the contractor, Bechtel, agreed to build the power plant. “The expectation was that if they set out to build it, it would work,” Ricker says.
Once the first project is built–and if it proves successful–investors should have the confidence to fund future projects, which would allow more plants to be built.