The purpose of the program is to help newer technologies get financing when they can’t find it from other sources and so far it’s been pretty successful. “The way we like to say it is 90 percent of the loan loss reserve that Congress provided for us still remains intact,” explains LPO Executive Director Peter Davidson. “Our whole portfolio of closed and committed deals is $34 billion and our loss is under $1 billion. So the loss is in the 2 to 3 percent range. If you compare that number to commercial banks and what they do in project finance (and they're not taking the technology risk or new process risk), that 2 to 3 percent compares very favorably.”
The LPO isn’t exactly a household name. But one of the programs it administered, the 1705 Loan Program, gained notoriety leading up to the last Presidential election as Solyndra—which won a $535 million loan guarantee through the program—declared bankruptcy and put taxpayers on the hook for the money owed. However, Solyndra and later Abound Solar were the two main companies to go bankrupt that were supported by the program; but losses were and are still less than aniticapted. “On the energy side, on the 1705 program, the losses there are right around $600 million, and that compares to the $2.4 billion,” or 75 percent of the money provided by Congress as a loss fund for the program is still available, Davidson says.
While that’s impressive, considering the loans were to companies that were transitioning from startup to commercial production phases — often called the valley of death — the LPO’s support of large, utility-scale PV and concentrating solar projects (in excess of 100 megawatts) is returning even better results. “We have 19 generation deals in all forms of renewable, six PV, six CSP and then some wind and geothermal, 19 generation deals all with long-term off takes and all with at least 20 year deals,” Davidson explains. “100 percent of those are performing and are paying their interest back and we have no issues there...Of those 19 projects, 12 are now contributing energy to the grid. Once that happens, they're significantly de-risked. And then we have another four deals coming online over the next six to nine months.”
Davidson explains that before the LPO got involved there was no such thing as large utility-scale solar. “In 2008, 2009…it was all rooftop or small systems. So the whole idea of utility-scale solar, which we're considering 100 megawatts and above, did not exist before 2010,” he says. “Up until that time there were developers who were interested in developing those projects and they were willing to put their own money, 20 to 30 to 40 percent of the cost of the project, they were willing to invest as equity and the technology,” he says. But scaling solar up to such a large size hadn’t been done before and commercial banks wouldn’t lend to the projects. “So it was very difficult, virtually impossible for them to secure project financing debt,” he recalls.
“They could get the equity and developers had the projects, they had all the permits and everything, but they couldn't get the debt,” Davidson says. “This is where the LPO stepped in and in the end of 2010 and into 2011 we financed the first six utility solar scale projects that have ever been financed in the country and that was Agua Caliente, Antelope Valley, Project Amp, CVSR, Desert Sunlight, Sempra Mesquite.” The LPO financed some directly and others through gathering banks together and providing a loan guarantee.
“We wanted these other commercial lenders to start getting familiar with the actual projects, familiar with the developers, familiar with the equity partners, so that when we get enough of these deals, they'll be more likely to step in,” Davidson says. After financing the first six 100 megawatt or more projects, 1705 lost its ability to do more loans, the business could have flailed.
“Since that time, 10 new utility scale PV projects have gotten financed and are under construction. We really think that's a great example of the way we at the LPO and the Department of Energy kind of hope to run this program, which is we make ourselves available to provide debt.…But hopefully if we made the technology assessment right — and the developers have too — once we prove out the reality of it in the first two or three projects, then we move back from the business and don't finance going forward, then the commercial sector comes in. That's just what happened with PV solar,” Davidson says. “We're very happy with that.”
Now, with the first two CSP projects, the 377 megawatt Ivanpah Solar Electric Generating System by BrightSource and the 280 megawatt Solana project by Abengoa, set to come online in the next few weeks or months, LPO is hopeful it will see a repeat of the success with PV. The average loan size of these types of projects are $600 or $700 million dollars, Davidson says, so it’s no small bet, but once these systems start proving themselves things could change. “With CSP just the first guy is now in the market to try and commercially finance CSP. So we don't know yet if there's been commercial uptake on that from the banking sector and we're certainly hopeful on that,” he says. However, he notes that BrightSource has signed an agreement to build a project similar to Ivanpah in China.
The LPO hasn’t been able to make more funds available to renewable energy since it shuttered 1705. But that may change soon. “We're right in the midst of doing this $8 billion fossil fuel solicitation,” Davidson says. The funds will support energy efficiency, combined heat and power, waste heat recovery and perhaps even microgrid and fuel cells. “Then after that we plan to do another renewable solicitation. We have authorized funds of about a billion and a half for renewables,” he says, adding that the LPO can also pull from other funds and could make the opportunity between $2 billion to $4 billion.