Solar power developers cheered when the federal government promised earlier this year that it would hurry up and help them secure financing for multimillion-dollar projects.
The government hasn't acted as quickly as the industry has hoped, sparking concerns among industry executives on whether they could get the money and meet regulatory and self-imposed deadlines.
The government is offering two incentives: a cash grant that offsets 30 percent of a project cost and a loan guarantee program. The U.S. Department of Treasury was supposed to release the grant application this month, but that has been delayed until next month.
The loan guarantee program requires recipients to start construction by Sept. 30, 2011, yet the government hasn't issued the rules for the program.
The U.S. Department of Energy has offered a loan guarantee to a solar company, Solyndra, for building a solar panel factory. But Solyndra applied for it under an older program, not the new one authorized by the American Recovery and Reinvestment Act passed in February this year.
"If you want to use the cash grant and the loan guarantee, then the project will be delayed until 2010," said Karen Wong, a partner at law firm Milbank, Tweed, Hadley & McCloy, at a solar thermal power conference in San Francisco last week. Projects that aren't "well underway already might be difficult to meet that deadline."
Waiting for the U.S. Department of Energy (DOE) to approve loan guarantees isn't the only challenge.
Companies that up on the loan guarantee offers would have to go through the environmental process under the National Environmental Policy Act, or commonly called NEPA, even if the companies intend to build on private land.
An environmental review would generally take six to 18 months, depending on the project complexity and whether a project faces strong opposition. Developers who already signed power sales agreements with utilities typically have to meet their own deadlines for commencing power delivery.
"On one hand the White House wants rapid development. On the other hand, the DOE says we have a law to follow. It's a real problem," said Fred Morse, a senior advisor for Spain-based Abengoa Solar, which has a contract to build a 280-megawatt solar thermal power farm in Arizona and sell the electricity to Arizona Public Service.
Solar thermal power technologies make use of mirrors to concentrate the sun and heat fluids to generate steam, which is then piped to turbines for electricity production. These technologies are mostly new, though its advocates say the approach could generate cheaper solar energy than using solar panels and other technologies.
Some of the companies that aim to build on federal land and get loan guarantees said they started the environmental review some time ago when they started applying for permits to build on federal land. So the NEPA mandate in the loan guarantee program shouldn't be a big hurdle.
BrightSource Energy, for example, is one of the few that are far along in the process and could become one of the first to build a commercial solar thermal power plant among more than 200 solar power projects under consideration by the federal Bureau of Land Management (see The Rush for Gigawatts in the Desert Explodes).
The DOE staff knows the NEPA requirement might prevent project developers from meeting the 2011 deadline, so they are working on shortening the environmental review process, said John Marciano, an associate at Chadbourne & Parke.
"No one knows for sure how to do that yet," Marciano said. "They recognize that Obama and Congress want them to go through this quickly."
The federal loan guarantees aren't supposed to cover the entire cost of a project. Power companies will still have to seek debt or other financing from banks and other investors. Doing so has been tough since the financial market crisis set in last fall.
Banks aren't just reluctant to part with money because of the poor market conditions. They also prefer not to bank on what they consider new technologies, and that definition could cover many of the solar-thermal power plants being proposed and built right now.
"We are hoping the banks are repairing their balance sheets and raise new capital to release the capital back into the market," said Christopher Stolarski, senior vice president of power project finance at Mizuho Corporate Bank, at the solar thermal power conference. "We are not in the business of taking technology risks."
Join experts and influencers at Greentech Media's Growth Opportunities in the New PV Market: Projects, Finance and Policy in San Francisco on July 13.