The U.S. solar energy industry is having its best year ever, yet financing remains scarce for the billion-dollar projects needed for America's solar sector to gain ground on global leaders such as Germany.
For the U.S. solar industry to ramp up from a rooftop add-on technology to the scale of fossil fuel power plants, the country needs to build large plants covering hundreds of acres. Each can cost upward of $1 billion, a huge sum for the nascent industry to finance, even with U.S. government incentives.
Just last week, doubts arose about the largest thermal solar plant under development, the 1 GW plant proposed in Blythe, California, by Solar Trust of America, a partnership of Solar Millennium AG and Ferrostaal AG.
The company warned its federal loan-guarantee application was taking longer than expected.
U.S. solar sales are on track to reach about 1 GW this year, equivalent to one nuclear reactor. While solar panel makers and project developers are optimistic the country could become the world leader by the middle of the next decade, the U.S. industry remains far behind other countries, especially Germany.
Globally, solar installations are expected to reach 14 gigawatts this year. At least half of that will come in Germany, where developers have rushed to build projects ahead of cuts to financial incentives.
GOVERNMENT BRIDGE
The U.S. government has two key programs to help the industry: a cash grant that pays 30 percent of project costs for plants under construction by December 31, and a loan guarantee program that covers up to 80 percent of project costs.
Applicants to the loan guarantee program have complained the process is too lengthy and murky, leading to just a handful of projects winning approval.
This summer, Abengoa won a $1.45 billion loan guarantee for its 280-megawatt solar plant in Gila Bend, Arizona. Regulators are paging through applications for other projects, including a cluster of plants in California that would provide more than 4,000 megawatts of power.
Experts say it is unlikely all the proposed projects will be built, in part because of high financing costs.
Bankers generally prefer smaller, less risky projects and shorter-term loans than the 20-year terms solar plants typically need.
If big banks are willing to get involved, their lending rates run about 8 percent, roughly double the level of the government rate.
