Exclusive: Details Emerge on Financing of SolarReserve Utility-Scale Power Projects

SolarReserve, a developer of utility-scale solar thermal power projects based in Santa Monica, Calif., is planning to tap public and private money to finance the development of two new projects, each backed by recently signed long-term power purchase agreements (PPAs).

Last week, ?SolarReserve announced that it had inked two separate PPAs (… and see?here ): One for a 100-megawatt project to be developed in Nevada, and another for a 150-megawatt facility in California.

SolarReserve CEO Kevin Smith tells GER that the two power plants are each expected to cost about $500 million to develop.? One financing option being considered by the developer is to back the debt required to develop each project with Department of Energy loan guarantees. The government program could cover?as much as 80 percent of the project costs, Smith told us in a phone interview. The balance of the cost would?come from company equity.

The DOE loan guarantees were enacted as part of the 2005 Energy Policy Act. From the start, the funding stream was hampered by rigid regulations that, among other things, gave the DOE first priority lien on the collateral of a failed project. That?made it nearly impossible for clean energy projects to structure a financing package that included private backers since they were pushed down the food chain if the project went bust.

Under the new rules released earlier this month, the DOE said it will decide on a project basis whether its loan guarantees will have first priority or whether to back a project on an equal-basis lending.

If SolarReserve qualifies its two projects for loan guarantees, one obvious advantage is that the government will step in to repay creditors if the project were to fail. Smith says it plans to engage in serious discussion with project finance banks early this summer.

The two projects will use solar power tower technology, which uses a large field of flat mirrors called heliostats to focus solar energy on a receiver that sits at the top of a tall tower in the middle of the field– see drawing below. Heat transfer fluid passes through the receiver, absorbing the solar heat and reaching temperatures of over 1000 degrees Fahrenheit. The system can either direct the hot fluid to a steam turbine for electricity generation, or to a storage tank for use later, making it possible to meet electric demand even after the sun sets.

Each SolarReserve system consists of an approximately two-square mile solar field and 600-foot tall tower. The systems use solar salt for the heat transfer fluid, which both has good energy storage properties, and is more environmentally friendly than the fossil-based fluids used in some other solar thermal technologies. The salt does pose design challenges to minimize corrosion of metal components throughout the system.

SolarReserve’s 100-megawatt Tonopah project is backed by a 25-year PPA with Nevada power utility NV Energy. The Rice project will be developed in Riverside, California, with Pacific Gas and Electric agreeing to purchase the output of the 150-megawatt plant. The projects’ storage systems will use?energy storage technology initially developed by United Technologies.

Both PPAs have to be approved by Nevada and California regulators. In the meantime, Smith says, development on the projects will continue. Tonopah is expected to begin operating in 2012 and the Rice facility in California sometime in 2013.

SolarReserve raised $140 million in a second round of funding a little more than a year ago. Does it plan to return for a Series C? Smith tells GER that, funding-wise, the company is in good shape, having invested less that half of the capital so far. “The Series B takes us well into 2011,” he explains. The company does plan to raise more capital, but it would be to on a project basis and would not be done at the corporate level.

Company investors include Argonaut Private Equity, Citi, Credit Suisse, Good Energies, Nimes Capital, PCG Clean Energy & Technology Fund, and US Renewables Group.

Picture Credit: Mike Johnson, Las Vegas Review-Journal;The Breakthrough Institute
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