During this month’s U.S. government shutdown, an astonishing 1.3 GW of CSP began commercial operation, thanks to the Department of Energy’s former loan guarantee program for clean energy. Another several gigawatts is in construction.
During the few years the program had funding, it created the greatest increase in utility-scale clean energy in U.S. history, enabling the construction of some of the largest solar plants in the world, ending European hegemony in concentrated solar power (CSP).
CSP creates electricity the old-fashioned way with turbines turned by steam, except that the fuel creating steam is not shoveled in constantly as coal or gas, but delivered free as sunlight.
Competing with fossil energy, CSP can deliver dispatchable electricity on demand at any time day or night because of its inherent ability to provide thermal energy storage.
On October 9th, Abengoa’s 280-MW Solana project quietly started shipping this dispatchable thermal electricity to the Arizona grid — during a government shutdown instigated by some of the same animosity to subsidies that shuttered the loan guarantee program.
Abengoa’s 250-MW Mojave plant is due online next summer. BrightSource’s 390-MW Ivanpah project also just successfully synced the first of its three towers to the grid.
Like Solana and Mojave, SolarReserve’s 110-MW Crescent Dunes project in Nevada, due online next spring, incorporates storable thermal energy to ship electricity after sundown for six hours into hot summer evenings.
Solar Power Day or Night
“We can deliver 100 percent of our capacity when the utility wants us,” said SolarReserve CEO Kevin Smith. “If you don’t have storage, it’s pretty much you take the power when it’s available. If the wind is blowing at 3:00 a.m., the utility has to take it at 3:00 a.m.”
Smith has a 20-year utility contract to supply Las Vegas nightlife with electricity from midday to midnight. But this is flexible if, for example, a gas plant must go offline for repairs.
“In reality, the utility could the day before say we want you to start earlier tomorrow,” he explained. With storage, a CSP plant can start up and stop whenever needed — meaning that it can displace traditional fossil energy.
America developed the world’s first CSP project, the 354-MW SEGS, which has been supplying the California grid since the Carter administration. But almost nothing was built since its developer was bankrupted by the Reagan administration’s sudden cuts in subsidies, discouraging new developers — until now. BrightSource arose from the engineering team that led that firm (Luz).
How Government Subsidies Cut Costs of New Technology
CSP Alliance founder Tex Wilkins worked at the Department of Energy (DOE) from the Carter era until the new loan guarantee program. When asked approximately how much of the CSP now coming online was thanks to the DOE program: “Approximately all of it,” he deadpanned. “In that they all have loan guarantees.”
“Nowadays we have projects that are about to come online 400 MW in size, and that’s due to the DOE loan guarantee taking that initial risk of putting new technology out there at the scale that you need to,” explained Minh Le of the DOE’s SunShot program, which works to bring solar down to 6 cents a kilowatt-hour.
With any new technology, only mass deployment brings costs down by actually building the first of a series of these huge and expensive projects to start supply chains. Utility-scale energy is not a mass-market gizmo that can bend the cost curve by selling to millions of consumers.
“These companies learn how to build these power plants, learn how to build them more efficiently,” Le explained. “Over time, that becomes cheaper, that’s where the tremendous value of the DOE loan guarantee came into play.” Four or five years ago, nobody was building large scale utility solar projects. Nothing was over 10 MW.
Jeff Holland from NRG Energy — the owner with Google and BrightSource of Ivanpah — agreed.
“The DOE’s renewable loan guarantees support solar projects that use promising new technologies that might otherwise not be able to secure private financing,” said Holland. “When we successfully demonstrate these new technologies with the support of loan guarantees, the technologies become cheaper and proven on a large scale so that NRG and others can develop them without public support in the future.”
Rigorous Milestone-based Loan Guarantees
Former VC funder Jonathan Silver was brought in to head the loan guarantee program. He stepped down in 2011 after Republicans took the House and defunded its renewables portion.
“Despite the hyper partisan attacks on the program, the facts are clear,” Silver said. “The program was a great success. It launched the CSP industry, We built the largest project finance bank in the world and successfully deployed nearly $40 billion dollars in just a few years and did it with a loss rate equal to just a fraction of what Congress actually appropriated for anticipated losses.”
CSP was just one of the funded clean energy sources, of course. It’s share was minor. But for all of these innovative clean energy technologies, even Solyndra’s novel cylindrical thin film, the loan review process was described by applicants as significantly more rigorous than that done in the private sector, according to Silver.
“The projects were deeply diligenced and included rigorous reviews by independent experts of their technology, finances and operations and environmental impacts,” he explained.
“Safeguards were actually built into the loans themselves in the form of covenants with the borrower. Term sheets laying out the conditions for the loan and the protections in case of breach typically ran 50 pages or more and included numerous milestones around the technology, construction, operation and output of the projects.”
“It’s probably the toughest due-diligence exercise that any of us had ever experienced,” private equity investor Hudson Clean Energy Partners CEO Neil Auerbach told RETECH 2011.
A Hoover Dam of Power
Most of the projects completed requirements, closing DOE funding during the last 12 months before its October 2011 demise.
“It’s a big surge,” said SolarReserve’s Smith. “Like when there’s a blackout and there’s a lot of new babies nine months later. “Most of these CSP projects — because they have steam turbines and rotating equipment — have 24- to 34-month construction schedules.”
Ivanpah just completed its first grid-sync test successfully, and its next two units are on track for December testing. “The sync to the grid for the final two units is effectively the last major milestone prior to commercial operations,” Holland said.
Commercial operation could then begin — depending on the timing of the start of their utility contract — unless the site team wants further engineering tweaks.
“They may sync it and run it for a while and then shut it down to see the results of the sync and how various components performed,” he explained. But these last hurdles are the smallest. For the first six projects now coming online, building a massive Hoover Dam of clean energy, these final milestones are the culmination of much-maligned but actually successful program.
“The results speak for themselves,” said Silver. “Today, almost five years after the first loan was made, there is a less than 3 percent loss rate. This is an enormous success and even more remarkable when one considers that the loans were made to companies deploying new technologies at commercial scale over a very short period of time.”
Silver summed it up: “This is a story Americans can be justifiably proud of.”