DOE signs off $4.5BN First Solar loan guarantees

30 Jun 2011

US government backing for three utility-scale thin-film photovoltaics projects with combined peak output power of more than 1.3GW.

The US Department of Energy (DOE) has given the green light to three giant photovoltaic projects being developed by First Solar, with its confirmation of $4.5 billion in conditional loan guarantee commitments.

The projects, which are all based in California and will each require millions of thin-film CdTe modules, should deliver a combined peak output of more than 1.3 GW once constructed. Modules for the plants will be produced at First Solar’s new manufacturing facility in Mesa, Arizona, as well as its existing site in Perrysburg, Ohio.

The loan guarantees mean that the US government will share in the financial risks of such large-scale PV projects, by agreeing to cover the debt obligation of a borrower involved in the project in the event that they default on a loan.

The three Californian projects receiving the guarantees comprise the following:

• a 230 MW power plant slated for the Western Mojave Desert just to the north of Los Angeles, resulting in an expected 622 GWh of electricity output per year sold to the Pacific Gas & Electric Company (PG&E). This project will feature a new kind of inverter technology to make the variable output more stable. Loan guarantee: $680 million.

• a 550 MW project in eastern Riverside County that will use an anticipated 8.8 million CdTe modules. The project will proceed in two phases, with the first 300 MW sold to PG&E and the remaining 250 MW to Southern California Edison. The development is using $1.88 billion in loans from a syndicate led by Goldman Sachs and Citibank, which are partially guaranteed by the DOE.

• a second 550 MW project, this time in eastern San Luis Obispo County, will require some 8.5 million CdTe modules and the power generated will again be sold to PG&E. The DOE is providing a partial guarantee for $1.93 billion in loans for the project from a syndicate led by The Royal Bank of Scotland (RBS), the bank which is now majority-owned by the UK government.

Diversification
Confirmation of the DOE backing will come as a significant boost for First Solar, and the company’s stock price immediately rose by around 7% following the announcement. It will also aid its geographical diversification strategy, making the company less dependent on demand from the key markets of Germany and Italy, where government subsidies for PV installations are being reduced.

To put the size of the three Californian projects into context, the need for modules capable of producing 1.3 GW of peak electrical power compares with First Solar only recently passing the milestone of manufacturing 4 GW worth of modules since it began operations in 2002.

Recent years have seen the company invest heavily to increase manufacturing capacity, and First should end 2011 with a total capacity of around 2.3 GW, thanks to expansions in Germany and Malaysia. Next year, capacity is slated to rise to 2.8 GW after the new facility in Arizona begins production runs, along with another new site in Vietnam.

In the US, First is contracted for a pipeline of 2.4 GW in utility-scale projects, including the three Californian projects now underwritten by the US government. Beyond conventional markets, the company also sees a demand emerging in India, where it expects to deploy more than 100 MW this year, and also in China, where the government has committed to some aggressive solar targets.

In a statement announcing the DOE guarantees, US Energy Secretary Steven Chu said: “These projects will bring immediate jobs to California in addition to hundreds more across the supply chain. Together the projects will power hundreds of thousands of homes with clean, renewable power and increase our global competitiveness in the clean energy economy.”

According to the DOE’s figures, the three projects are expected to create some 1400 jobs in all, and provide enough electricity to power more than a quarter of a million homes.