Permits and Financing Bring ‘Day of Reckoning’ for Solar

2010 will be a day of reckoning for solar projects that have been announced,” said Mark McLanahan, CEO at Renewable Ventures, a Fotowatio company.

Five hundred bankers and solar executives speculated about the promise and pitfalls of implementing solar power projects at the 2010 Solar Power Finance & Investment Summit in San Diego last week.

Permitting the Biggest Challenge

Permit approval and securing financing dominated the two-and-a-half day meeting as the greatest obstacles to completing projects.  A panel of venture capitalists agreed that in all cases, developing solar projects and technology consistently takes longer than expected.

According to Sven Strohband, partner with MDV-Mohr Davidow Ventures, this is because “materials science is hard, but not as hard as biology: We are trying to do something truly new, and solar investments require a lot of capital to go to market.”
“Permitting continues to be the single biggest challenge, there are options on the financing side,” said Natalie Schaefer withBrightSource, a company that is working to site 400 MW of solar thermal projects in the California desert.

Deadline for Federal Dollars
Permitting and financing are even more of a challenge when there’s a deadline. Time is short for those  companies applying for federal grants covering up to 30 percent of the cost of renewable energy projects. The funding is part of the 2009 American Recovery and Reinvestment Act. In order to qualify, projects must start construction by December 31, 2010, and the job gets tougher if your project is on federal land.

To help meet impending deadlines, the Bureau of Land Management (BLM) has created a “fast track” process, but even then, permits are not expected to be approved until September 2010.

On the finance side, Rainer Aringhoff of Solar Millennium pointed out, “That gives companies like Solar Millennium two-and-a-half months to close financing on billion dollar projects.”

Fast Track to Meet Grant Deadline

According to Greg Miller, the BLM Program Manager of the California Desert Renewable Energy Coordinating Office, there are 34 projects in the fast track process, and nine of these are solar projects.  Two solar projects have already gone through the environmental review, five more should be finished next month, but some may not make it.

Rainer Aringhoff expressed anxiety about the process, “The entire industry is concerned about the time frame set by the ARRA cash grant funding.  As an industry, we are concerned that on the federal side with BLM, it looks good, yet there are misalignments with other agencies such as California Fish and Game.”

He expanded with an example that many large solar desert developers are now facing.  Recently, California Fish and Game highlighted that there might be impacts on the Golden Eagle.  Even though the department has not issued specific guidelines, all of the developers are conducting studies just in case the department requests more information in the future.

California is clearly the most difficult jurisdiction when it comes to environmental permitting.  Speakers such as Bill Chilson at NextLight said his projects in Nevada have not had significant objections from the environmental community.  However, his company has worked closely with the off-road vehicle community to respond to their concerns.

Solar Industry Needs Clarity

To create a clear and transparent process, BLM is leading the Desert Renewable Energy Conservation Plan (PDF) to coordinate permitting among four state and federal agencies with jurisdiction in the California desert. This includes the California Energy Commission, California Department of Fish and Game, Fish and Wildlife Service, and the Bureau of Land Management.

The plan is expected to take two years to develop, and the goal is to designate a set of conservation areas and renewable energy zones with permits in place. Several speakers highlighted the need for this type of coordination, although it comes too late to benefit the 60 companies applying for the federal cash grant this year. It was pointed out that it doesn’t make sense to site a project in a suitable conservation area if it is not feasible because of transmission failure. A draft conservation strategy for the DRECP is expected out on April 30, 2010.

New “In Lieu Fee” Plan to Streamline Mitigation

Kevin Hunting, Acting Chief Deputy Director with the California Department of Fish and Game, says the state is proposing an “in lieu” fee to make mitigation more efficient and transfer the burden of mitigation from companies to the state.  Compared to other power generation, solar requires a large amount of land, which creates a challenge for developers to buy land quickly to meet mitigation requirements.  Often land prices soar, and projects become too expensive.

The “in lieu” plan would pool industry mitigation fees and allow the government to be more strategic about species protection.  “It is definitely helping [us] to have more flexibility in the process.” He added, “but we are under no illusion that it will be cheap—likely in the seven digits,” said Rainer Aringhoff.

We Are in the Game Together

The California Environmental Quality Act (CEQA) was also a popular topic at the conference. Mark Tholke, Director, Southwest Region at enXco, encouraged the industry to stay positive: “There are rules that we either live by, or work to change.  CEQA is difficult.  I suggest that if renewable energy is a public policy goal, having some flexibility around CEQA is not a crazy idea.”

Fortunately, Kevin Hunting and others agreed, “There is a strong commitment by the environmental community to get projects permitted.  I believe we can find a balance and that there is sufficient land out there.  Our goal is to meet the law and that it is defensible.  If the permit gets sued, the department gets sued, but also the project gets stopped.  We are in the game together.”

photo: ClearlyAmbiguous