The Northeast Poised to Become Solar Giant Driven by State Incentives

According to a Standard and Poor's analysis released today, the Northeast is well positioned to become the country's solar leader.

Swami Venkataraman cites the below table breaking down state solar incentives along with locally high retail electricity rates and declining panel costs as the primary drivers behind this market expansion.

Venkataraman goes on to point out that while these are laying the groundwork for potential success for solar developers in this region, several important factors could keep growth stunted including slow financial markets, unavailability of tax equity, and permitting problems. He emphasizes throughout the article the importance of these incentives to the cost-competitiveness of solar.

Venkataraman's article perfectly outlines the importance of a variety of regulatory structures that can effectively promote renewable energies. State and local policies are filling the gaps in federal policies and the finance drought across the country.

At the recent RETECH 2010 conference organized by the American Council on Renewable Energy (ACORE), Mayor George Fitch of Warrenton, VA was just one of the delegates to a panel on state and local programs. During his presentation on the Town of Warrenton's 2MW landfill gas to power plant, he drove the point home saying, "the financing only works on these small-scale projects with federal and state incentives."

Renewable energy's future does not look like a solar panel on every roof or a windmill in every back yard, but rather it will be a localized effort with generation suited to the location. Could it then make sense to likewise control certain policy incentives and also distribution controls at a similarly regional or local level? Could that negatively impact the financing climate for these systems, to have hundreds of different incentives and policies to keep track of? Finance and banking is often not accomplished through hometown local lenders anymore. Will national or international banks be willing to gamble on a county ordinance? They may decide to require additional guaranty instruments to protect their interests.

Ultimately I think that as the industry grows, so will the comfort level of all types of lenders including your hometown savings and loan. Renewable energy has always had a grassroots element to its nature and that can be an asset for adapting locally to different policies and needs.

Regulatory Uncertainty is Crippling the RE Industry

EDPR Slashes US Growth Due to Political Uncertainty

EDP Renovaveis, the Portugal-based wind developer responsible for over 6.2 GW of installation (3rd in the industry), reduced it's forecast for US installations by 500 MW through 2011. If we used a very basic ballpark figure of wind installation costs at around $4 million/MW, that's $2 billion in US-based construction that's not going to happen.

CFO Rui Teixiera cites the unfavourable climate for Power Purchase Agreements (PPAs) without "[...] a long term and enforceable – and particularly federal – framework in the US". Which, when you think about it, makes a lot of sense. A Power Purchase Agreement between a utility company (power distributor) and a renewable energy project developer/owner (power generator) wherein the price that the utility agrees to pay for the power produced is established, heavily favours the utility when there are no bankable long-term financial incentives that help offset the cost of building the facility.

Some may say that an industry shouldn't need special treatment and incentives if the marketplace needs its product. Saying that renewable energy doesn't make economic sense if it requires subsidy to match the cost of fossil fuels is unfair though, because fossil fuel power generation facilities are built using subsidies as well.

All of the current administration's best intentions won't create lasting solutions for renewable energy unless a long-term, reasonable, and comprehensive energy policy can be established with safeguards against its dismantling. That doesn't seem likely when it requires a supermajority to get anything accomplished in Congress...

Bloom Box: The Shakedown

Press Conference Highlights

Nothing really earth shattering was announced that hasn't already been speculated, and my suspicions have been confirmed!

When asked about the cost-competitiveness of the boxes to conventional grid power, Sridhar said his current customers were paying 9-10 cents per kwh. However, when pressed whether or not that included incentives he merely answered that the price was the cost and all his customers were in California. Basically, yes without saying yes. The boxes as of now only make sense when they're discounted 50%.

They are also 10 years away from being solar powered. Sridhar claims that the market simply doesn't support the cost of the configuration yet.

All in all I'd say the technology is promising and interesting, but they didn't deliver as much as many hoped for the amount of fanfare and venture funding they've received.

Their website is fully up and running now, go check it out. The blogosphere as buzzing about Bloom Energy being the Apple Computers of energy. I was thinking more like the Google of energy. Oh, wait.... that's what it is!

Bloom Energy Official Site

Bloom Box Unveiled

Click Here for Live Blog Inside Press Conference

Stay tuned for more details and analysis of the product announcement.

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.

Balancing Policy Objectives with Bureaucratic Timelines

CSP Today's Weekly Intelligence Brief

A majority of the industry updates covered in the weekly CSP Today Intelligence Brief emphasize a common theme: timing.

The single largest stumbling block in the language of the ARRA renewable energy stimulus funding is the requirement that construction begin no later than September 30, 2011. Most large renewable energy projects require 3-5 year lead times from formation of the business model to breaking ground, particularly large projects requiring NEPA reviews and complex permitting procedures. BrightSource Energy, a much-lauded Israeli start-up funded in part by the omnipresent Google.org, has been dragging its 440 MW Ivanpah solar CSP tower project along for over 2 years now, and is still battling regulators and lawmakers.

The Oakland, California-based company has submitted a revised plan to the California Energy Commission (CEC) and   the Department of Interior’s Bureau of Land Management (BLM) that would reduce the project’s footprint of the overall Ivanpah project by about 12%.

With the proposed alternative design, BrightSource is trying to avoid the habitat of rare plants and other species. The company mentioned that the alternative design would reduce expected desert tortoise relocations by around 15%.

BrightSource is reportedly in the running for a Department of Energy loan guarantee and must begin construction close to their planned start date of late 2010 in order to qualify.

Another news item featuring the partnership of American company Fluor with Spanish Elecnor to provide engineering services on a 50 MW CSP plant in Badajoz, Spain mentions that services on that project began in 2009 and the engineering phase is not scheduled to be complete until 2011. The global financial freeze left many projects dead in the tracks for months now going on years, and the liquid capital required to bring projects far enough along for short or long term financing is scarce.

Granted, the point of ARRA is to help finance shovel-ready projects to get job creation jump started immediately. The Department of Energy also stated on the record at RETECH 2010 that any remaining funds after the current solicitation is closed will likely be rolled into a second solicitation.

The issue with this promise is that banks have been leery of the regulatory uncertainty surrounding renewables for a long time. Because of its highly politicized nature, incentives and programs are at the mercy of changes in the legislature and presidential administrations. Continuity has come to carry a high premium and the uncertainty leads to stagnation. When nations have implemented long-term energy programs that have been allowed to run their course, entire industries have blossomed and economies have grown. 

Today's American politics of  one-upsmanship and strictly polarized debates, the constant tug of war for power, are neglecting the very thing they claim to cherish. It is very difficult for a nation to flourish in spite of its leaders' worst efforts.

60 Minutes Interview Reveals New Fuel Cell. Can It Succeed Where So Many Failed?

The Bloom Box: An Energy Breakthrough?

In an interview with Leslie Stahl of the 60 Minutes evening news program (linked above), CEO of Bloom Energy K.R. Sridhar lifted a cube half the size of a loaf of bread and proclaimed that it could power an entire European household, half of an American household, or 4 Asian households.

Fuel cells are a lot like an open-ended battery. There is a central catalytic membrane that separates two chemicals that, when combined, generate electricity with their reaction. A battery has a set amount of each chemical available, but a fuel cell pumps the agents in continuously and harnesses the power generated. There are lots of different fuels including fossil and renewable options that work in these applications. However, fuel cells are generally very expensive to make with substantial amounts precious metals required.

Sridhar's Bloom Box was repurposed by Sridhar from a device he developed for NASA to generate oxygen on Mars. Venture capitalists have jumped on board, with a reported $400 million plus capital raise. Until now, however, no information or products had been released, and the company website is cryptic at best and Sridhar claims that in 5-10 years there will be a Bloom Box in every home, at a $3000 price point.

They have a long way to go. Currently production capacity is at one box per day and while some large companies have tested boxes and are now endorsing the company, it doesn't escape attention that all of these installations have been in California where a state tax credit combines with federal incentives for a 50% price cut.

Fuel cell technology is not exactly new, and few successes have been known in reducing the cost of close-cousin battery technologies. Several articles and the linked segment have all pointed out the same thing- fuel cells and other energy technologies can be successful and experience cost reductions when appropriate long-term policies are established to encourage the market. Policies such as these have been instrumental in the development of telecommunications and computer technologies and can do the same for energy.

The problem is the degree of politicization. Energy is not a partisan issue, it's a practical one. Commerce and industry require energy abundance, and relying on outside sources of this energy is foolish at best. Fostering high tech local job creation in the long term while stabilizing our economy through energy security is good for everyone.

Stay tuned for the product launch this Wednesday, February 24th!