US rolls out first clean energy loan guarantee

One of the keystones of President Obama's USD 787bn economic stimulus plan is USD 66bn in funding for clean energy, including wind and solar project investment grants, tax credits for manufacturing facilities, transmission upgrades and USD 5bn in renewable energy loan guarantees.

Last week, the Department of Energy and Department of Treasury made good on that last component, issuing the first USD 535m guarantee for PV module manufacturer Solyndra's planned 500MW per year factory in California.

And on Monday 23 March, in a small session in Washington's Old Executive Office Building, Obama announced a series of measures for clean energy R&D on a timeline that will bring not only smiles, but sighs of relief to the early movers in the sector.

Solyndra's loan covers approximately 73% of the cost of its new plant. The company is still required to raise its own capital to finance the plant in order to meet what the government describes as "certain conditions precedent", at which point the guaranteed funds will be disbursed directly by the federal government, via the US Treasury's own bank.

The plant Fab 2 will manufacture the company's unique PV modules, which use a copper indium gallium selenide semiconductor deposited onto a flexible substrate and then rolled into a sealed glass cylinder to form cells which are racked into modules for commercial roofs.

With its semiconductor less well proven than other established thin-film PV, and its cell and module application wholly novel, the company is certainly a candidate for a loan guarantee for its innovative approach alone.

The DOE's loan guarantees have been on the books since 2005, and Solyndra is hardly a latecomer to the guarantee process, having applied during the far less sunny days of the Bush administration in 2006.

The deal, however, should be closely watched as a bellwether of how Secretary Stephen Chu's science-oriented DOE will evaluate loan-worthy enterprises, and disburse funds from the federal Treasury.

Solyndra, with at least USD 600m in equity backing from nearly a dozen major venture investors, is not a desperate, distressed firm looking for a bail-out. But as the terms of the guarantee state, the government's backing is a necessary but not sufficient condition for successfully financing Solylndra's fab.

New Energy Finance caught up with CEO Chris Gronet in Washington, who said that the company is still required to raise several hundred million dollars more capital for the full financing, which he did not anticipate to be easy in the current climate.

The attendees at the small conference, ranging from industry analysts to inventors to early commercialisers, had gathered to hear Obama announce a decade-long extension of credits and funding for basic R&D in the sector, making permanent the US' Research and Experimentation Tax Credit, which has often lapsed.

The industry leaders present cheered at this prospect, and well should they. A decade's visibility on R&D credits, with the prospects of loan guarantees to bootstrap innovative technologies from the lab to the fab, are a blessing for the sector.

Extensions and expansions of federal tax credits, and now grants, have finally given enough visibility for manufacturing and project development to allow for proper capital planning.

Source: New Energy Finance