Marco Geraghty of CSP Today spoke with Peter Davidson to reflect upon the Loan Guarantee Program and its impact on the concentrated solar power industry.

Marco Geraghty of CSP Today spoke with Peter Davidson to reflect upon the Loan Guarantee Program and its impact on the concentrated solar power industry.  This interview was conducted in conjunction with CSP Today USA 2014, where the legacy of the program will be analyzed so that achievements in the United States can be leveraged both domestically and abroad.

Part 1: Reflections On The Loan Guarantee Program

P.D: The Loan Guarantee Program, which funded CSP developments in the United States, came out of the Recovery Act. The mission was to finance the first commercial deployment of renewable technologies and so to fund large-scale renewable projects.  The goal was also to spur innovation, new technologies and to reduce greenhouse gases — to see if there were new technologies out there or new ways of doing things, and if those new ways are going to be create a better technology.

It was a win-win, good for the nation and good for the environment — but at the same time, senior lenders and banks have always been reticent to make loans to the first deployment of a new technology, and CSP was/is new and innovative in many cases.  This reticence is always heightened when that first loan is a massive amount, which is necessary in the development of a CSP project.

The other pieces of the developments were in place.  There were customers in place to buy the power once it was generated. Largely, these agreements were there because states had passed their Renewable Portfolio Standards or Renewable Energy Standards, particularly in the western states — California, Arizona and Nevada all had their procurement plans in place in 2009/2010.

So there were off-takers available and as a result there were also young equity investors (whether they were utility companies, private equity guys, or some of the bigger investors), but when they went to their banks for the seven, eight, nine hundred million dollar loans which it takes to build one of these projects, they just could not raise that senior financing. It didn’t help that they were trying to find this money right when our financial system was having its problems.

So, it was a double whammy of problems. One was just the lack of credit in the post-recession world and the other was the fact that had there been credit available, it has historically been very difficult to raise debt financing for new technologies and CSP is considered new technology.

Department of Energy


Peter Davidson, Executive Director of the Loan Program Office (LPO) at the U.S. Department of Energy

Peter Davidson, Executive Director of the Loan Program Office (LPO) at the U.S. Department of Energy


Program Demand

We didn’t really know what sort of demand to expect — that’s kind of the beauty of our business. We have conditions we have to meet and then we put out a solicitation, then it’s really up the creativity of the developer community to come to us with projects.

There was an overwhelming response to it, and in the two years that we were really active we put out $16 billion of loans on the energy side. But I think what was really interesting is that we got hundreds of applications from all different types of renewable energy: transmission lines, wind, solar, geothermal and different areas even below that.  But we ended up 85% in dollar amount of the deals that we financed were all in solar.

With the strong backing of great utility long term power purchase agreements, all that was missing was a lender who was willing to commit hundreds of millions of dollars to a particular transaction and a lender willing to take the time to understand the technology.

We think that was because solar was at the right point of really being able to explode commercially. The long term off-taker agreements were in place. The technology had been proven at a smaller scale or proven overseas for both PV and CSP. It was really just a question of could we scale both of these things up dramatically — large new projects here in the United States.

Working With The Developers And The Supply Chain

In the beginning they had to apply to us and we had nothing to do with their application. But once they came into the system, and we became their lender, it became an extremely intimate relationship.

At the LPL we have a 25 person technology team and those people first have to understand the technology and innovation.  But from 2010 to now we had five CSP projects and 14 other major generation assets which we had lent money to, all being constructed.

So our 25-person technology team also acted as project managers. People from our offices were at each one of these locations during the construction phase every two months. They were going out to the facility, visiting it, working very closely with the construction people, the equipment manufacturers and the developers to make sure everything was going smoothly and on-track and if there were ways we could be helpful we were there on site.

A breakdown of how the Abengoa Solana CSP solar installation will affect the area.

A breakdown of how the Abengoa Solana CSP solar installation will affect the area.

In terms of the supply chain, we can take the Solana project as a case study.  Clearly, massive amounts of glass are needed in the construction of the mirrors for these projects. So in the Southwest, RioGlass Solar opened a manufacturing facility right in the nearby town of Surprise, Ariz., which was purpose-built to supply glass to Solana.   Now, they have such expertise that they are supplying glass to other facilities.

Overall, the supply chain for the Solana plant covered 27 states — so 27 states were involved in having at least one company that provided parts for Solana and more than 90 U.S. companies were involved in that.

The Legacy — And Exporting American CSP

Drawing on experience of the PV market, the program financed the first five projects up until our authorization to lend money expired in 2011 with the Recovery Act.  But after we stopped funding, 10 new PV solar projects of over 100MW have come to market, have been financed commercially and some are even up and running now.

That’s the kind of work we like to do.  We like to prove a technology.  We get in and fund it, demonstrate that to the market and get out.

On the CSP side, the front end of that is exactly the same. You know, we financed the first five CSP solar deals. One of them is in full operation and the other ones are coming online.  We think the technology works. So it’s been a success from the technology perspective, which is really what we are funding and demonstrating.

We will know if we have complete success once the next one, two or three CSP deals get financed and constructed — we are all waiting for that to happen.

As you know, one of the things that may hold back CSP development in the United States is the cost of other forms of energy —the competitive cost. Because of the natural gas boom in this country it has placed more pressure on all forms of renewables.

When we speak to the CSP developers, I think they are finding that there is going to be great opportunity for them to take the technology, take the learning from the United States and the projects they have built here and really start exporting that for projects overseas.

We think that that exporting the American CSP lessons is the great opportunity — things have really been proved out here.

Part 2: The Advantage Of Storage

I could not be more proud of the Solana project which is opening in the next month or two. It’s already contributing power to the grid and it is a phenomenal project both in its size (250MW) and with six hours of storage.


Davidson: “I could not be more proud of the Solana project which is opening in the next month or two. It’s already contributing power to the grid and it is a phenomenal project both in its size (250 megawatts) and with six hours of storage.”

I think what we have been able to show there, with the developers Abengoa, is that we can solve one of the key problems that renewable technologies have had in gaining broader acceptance — and that is the intermittency.  You only get solar power when the sun is out, you only get wind power when the wind is blowing — and the real issue for the grid (and to make all of our systems work) is that we need both smooth generation of solar power but also to dispatch it on a more consistent basis into the grid.

In particular, we need to dispatch it during the times of peak load in the grid, which is really early morning and late afternoon. So a lot of the time the problem we have with solar is when the sun sets it correlates just to when everyone is just getting back from work which is the peak time of energy usage.

The whole mission for the renewable industry is: how can you provide power really in that later afternoon/evening time frame when the sun isn’t shining?  Is there a way we can develop a night time solar capability?  And the reason I am so excited about Solana is just that.  We have created six hours of nighttime solar.

I think that we have proven the dispatchable value of CSP with Solana. That’s why we are so excited about it. By that’s why we need our friends in the media to help us get that word out because we know it and you know it but it’s a complicated story and people really need to understand the breakthrough technology success that has occurred there.

The United States has some very significant projects in CSP which we really think will hopefully have the whole world sit up and take notice of the power and success of CSP.

Part 3: Looking To The Future

We really do believe our mission is to take every form of energy that exists in the United Statesand make it cleaner and greener. So, we’ve done a great deal in renewables — the $16 billion of loans. The next area we’re really focusing on is the whole fossil fuel industry and all its branches and components.

So as part of the President’s climate action plan, we have launched an $8 billion advance fossil fuel solicitation in December. The goals of this program are what we mentioned earlier: to spur innovation of new technology and processes in energy, to make our energy system cleaner and reduce greenhouse gases.

Something of particular interest to the CSP industry is the concept of hybrid plants. Can we combine a CSP facility with an existing gas plant or a coal plant, or will a developer come and build a new facility which is a hybrid facility of solar plus a fossil generating asset?

Hybridization is something we think is a real innovation.  The technology is there – it exists elsewhere in the world. I think now is a very interesting time to get them deployed in the United States so we are looking forward to developers putting in applications for hybrid solar facilities married up with a fossil.

We also believe that hybridizing CSP with national gas is a great alternative. You’re reducing greenhouse gases right off the bat from the alternative forms of generation of coal or oil and then you get all the benefits of renewable power.  In addition, you get the greater dispatchability into the grid on a baseload basis.

Overall, we love CSP — we think it’s a great technology. We are very mindful of the point of intersection that we are at now. We have been able to prove the technology with developers acting in conjunction with the U.S. government. There are no questions anymore — CSP technology works. There is no question anymore that multi-hour storage connected to CSP works. So, all the things we hoped to do to prove out this technology and prove out the projects and get them grid connected have been achieved. Now we all have to focus on how we make sure that there is further deployment of CSP facilities.