Solar: DoE Ends Loan Guarantee Program with Final $4.7bn in Approvals
This past Friday, the 30th September, was the final day for approvals under the Department of Energy's 1705 Loan Guarantee Program. This was of course set up as part of the 2009 stimulus law and extended an existing Energy Department loan guarantee program.
Activity at the DoE under the program has also now of course become a highly political issue in the aftermath of the move by Solyndra into Chapter 11 - leaving the program exposed on its $535m loan guarantee, extended to the company in September of 2009.
In particular, Republican members of Congress have expressed concerns that the DoE, having allegedly failed to do proper due diligence on the Solyndra loan guarantee, would now rush through some final loan guarantee approvals before the Friday expiry of the program. You can read my original article on the likely negative affects of this political wrangle on solar stocks here.
Indeed, in the aftermath of the Solyndra announcement the DoE failed to move forward on two large loan guarantee applications:
- On Wednesday the 21st, First Solar Inc (FSLR) said that their application for a $1.9bn loan guarantee for their 550 MW Topaz project would not complete the application process in time to beat the deadline.
- On Friday the 23rd, a similar fate befell SolarCity's application for a $275m loan guarantee. The DoE blamed increased paperwork resulting from the Congressional investigation into the Solyndra decision. SolarCity's project, SolarStrong, would have put solar panels on the roofs of 160,000 military family homes.
However, despite the ongoing political debate the DoE earlier last week approved two new loan guarantees:
- On Wednesday the 28th, the DoE approved a $727m loan guarantee for a 110 MW solar project sponsored by Tonopah Solar in Nye County, Nevada.
- The same day, they also announced the finalization of a separate $337m loan guarantee for a Sempra Energy 150 MW project in Arizona.
Finally, on Friday the 30th, the DoE approved a final batch of loan guarantees or partial loan guarantees for solar projects for a total of $4.7bn:
- Sunpower (SPWRA) was awarded a $1.237 bn loan guarantee for the company's California Valley Solar Ranch project in San Luis Obispo, California.
- First Solar Inc (FSLR) received a $646 m loan guarantee for the company's Antelope solar generation plant in Lancaster, California.
- First Solar Inc (FSLR) also received a partial guarantee on $1.46 bn for the company's Desert Sunlight project in Riverside County, California.
- Prologis received a partial loan guarantee on $1.4 bn for Project Amp, which will put 752 MW of solar power on 750 existing rooftops across 28 states.
These approvals are undoubtedly supportive for the companies concerned. However, the politics surrounding support mechanisms for renewable energy looks likely to intensify. In particular, as I discussed in a recent article here, Republican members of the House Energy and Commerce Committee are now pushing for Energy secretary Chu to testify personally before the committee.
Given that next year is a Presidential election year, it is very unlikely that this issue will calm anytime soon. Most importantly, the financing funnel for solar projects has also been supported by the Section 1603 Treasury Program, which is set to expire at the end of this year. The extension of the program now looks set to become a major election issue. Not a good sign.
The worrying point is simply that the 24 GW project pipeline in the US utility scale sector is one of the most significant remaining sources of support for solar demand in the aftermath of the pullback in Europe. There must be a concern that financing these projects is going to become more difficult as room for any further government support mechanisms dwindles. For a fuller discussion, see my original article on the issue here.
All of this suggests that it remains a good time to keep your powder dry and stay on the sidelines.
Disclosure: I have no positions in the stocks discussed.
About the Author: Clean Energy Intel is a free investment advisory service (available at www.cleanenergyintel.com), produced by a retired hedge fund strategist who also manages his own money inside a clean energy investment fund.