... And We're Back!

Sorry for the long pause, folks. My last post was The day before I became gainfully re-employed and immediately caught up in a whirlwind of activity. I am now a project manager for Astrum Solar, a residential PV solar installer with offices in Maryland and Valley Forge, PA. My daily posting was mostly a product of having time on my hands and an interest in staying involved in the industry while I was looking for a new job. Now that I have one and things are settled down, this blog will resume a regular, if adjusted schedule. Expect weekly posts on Friday afternoons!


Two Greentech Media featured articles this week caught my attention that I wanted to share. The first touches on a subject that will gain more attention in the next year- utility deregulation as a demand-response driver of efficiency gains. Usually one would not think that regulatory restrictions being lifted from an essential service like an energy utility would result in the utility reaping windfall profits at the expense of the consumer. That would be the eventual fate of the upcoming deregulation of Pennsylvania's energy utilities, except that a new law recently passed requires utility companies to decrease their peak-demand energy use. Act 129 will require reductions in overall energy usage as well as peak energy usage reductions by 2011 and additional targets for 2013. The full text of the bill can be found here.

This is particularly good news for residential solar system owners in Pennsylvania, who produce power during peak hours when rates will become extremely high. It is also good news for smart grid companies whose technology will be essential to implementing these reductions, which brings me to the second Greentech article. The DOE recently announced a package of grants totalling $100 million for smart grid training programs. The cleantech industry will thrive if smartgrid technologies can be implemented across the country. Our archaic, analog grid designed like a string of christmas lights that shuts down completely when one bulb burns out is incredibly vulnerable to failure, disruption, and the severe security threats presented by such incapacitation. A distributed generation system capable of sensing and fulfilling energy requirements in realtime will save billions in lost or wasted energy.

It's Official (sort of): BrightSource wins first Dept of Energy Loan Guarantee to a Solar Developer at a Whopping $1.4 Billion

BrightSource Energy Official Press Release

The moment that many have been waiting for- the first stimulus loan guarantee funds for a project development. The Ivanpah project (ring a bell?) has been awarded a conditional DOE loan guarantee for $1.37 billion.

Not a lot to say about this one that isn't said better in the press release, however one big thing jumped out at me that I've been seeing a lot of.

In September 2009, BrightSource selected Bechtel as the engineering, procurement and construction contractor for the Ivanpah project. Bechtel Enterprises, the project development and financing arm of the Bechtel organization, has committed to become an equity investor in all of the Ivanpah solar power plants.

Basically this means that the contractor, who will be responsible for the design and construction of the plant, is also partially financing the plant. Which means to an extent they are paying their own checks. Not only is this a tremendously precarious position for a developer to place himself in, it is also a truly questionable conflict of interest, particularly when federal funds are involved.

Arrangements like these are becoming the norm and it is having a negative impact on project developers and other project sponsors, which hurts the industry as a whole. It would also not be surprising if Bechtel was providing some kind of output guarantee on the system, which large creditworthy EPC companies are able to do and also charge a hefty premium for it.

The loan guarantee can only cover up to 80% of the project loan. The loan ratio at a ballpark would look like maybe 75% loan to value. That means that at a minimum, the 400 MW project will cost $2.3 billion for a total of $5.7 million/MW. More likely, a guarantee in such a high amount with Bechtel providing equity would be more like a 65-75% guarantee which would make the $/MW even higher. Sounds to me like there's some serious price inflation going on and my money is on Bechtel's fee.