Ivanpah Solar Plant: The Money

No doubt you have read concerns that the Ivanpah Solar Electric Generating System down at the Nevada-California state line is an environmental disaster. You may even have heard some recent news that the plant is producing far less electricity than promoters promised. Today, I focus instead on whether it is a financial haircut for all Americans.

It’s not uncommon to find learned folks talking about the Ivanpah Solar Plant as though it was paid for with loans that the federal government “guaranteed”. Here’s the San Jose Mercury News… here’s Wikipedia… it’s was even reported that way by Associated Press reporter Michael R. Blood last week. But that’s the definition of politics – different people observing the same world coming to different conclusions.

It turns out that the Ivanpah project was so risky that nobody would make the loan. In fact, one of the three original partners, Google, quit making its investment payments partway through after calling “for a fundamental rethinking of the technology“.

By digging into the fine print within the financial statements and disclosures filed with the Securities and Exchange Commission by NRG Energy, we can see what happened.

On page 22 of NRG’s 2010 annual report form 10-K, here’s how NRG Energy described the project:

Ivanpah — On October 27, 2010, the Company executed a Letter of Intent to partner with BrightSource Energy, Inc., or BSE, to construct, finance and operate the largest solar thermal technology project in the world, the 392 MW Ivanpah Solar Electric Generating System in southeastern California’s Mohave Desert, or the Ivanpah Project. NRG plans to become the lead investor in Ivanpah, investing up to $300 million in the Ivanpah Project over the next three years. The investment is subject to definitive documentation (including the satisfaction of several conditions precedent), which is anticipated to be executed by the end of first quarter 2011. The Ivanpah Project is composed of three separate facilities — Ivanpah 1 (126 MW), Ivanpah 2 (133 MW), and Ivanpah 3 (133 MW), and all three facilities are expected to be fully operational by the end of 2013. The Ivanpah Project has received a $1.375 billion conditional commitment from the U.S. DOE for a loan guarantee, and has obtained all necessary permits and approvals. Power generated from the Ivanpah Project will be sold to Southern California Edison and Pacific Gas & Electric, under multiple 20-25 year PPAs, each of which have been approved by the California Public Utilities Commission. Ivanpah is located approximately 50 miles northwest of Needles, California, about five miles from the Nevada border on federal land managed by the U.S. Department of Interior’s Bureau of Land Management.

So in 2010’s annual report, NRG had lined up a loan guarantee. If it was unable to make the payments required to pay back the loan, then the federal government would step in and cover any shortfall, collecting the unfortunate surprise from US taxpayers. NRG sounded excited, and positive that with the guarantee it would find a willing lender.

One year later, On page 21 of the 2011 Annual Report form 10-K, here’s how NRG Energy described the project:

Ivanpah On April 5, 2011, NRG acquired a 50.1% stake in the 392 MW Ivanpah Solar Electric Generation System, or Ivanpah, from BrightSource Energy, Inc., or BSE. BSE maintained a 21.8% interest in Ivanpah and the remaining 28.1% was acquired by a wholly-owned subsidiary of Google. Ivanpah is composed of three separate facilities – Ivanpah 1 (126 MW), Ivanpah 2 (133 MW), and Ivanpah 3 (133 MW). Operations for the first phase are scheduled to commence in the first quarter of 2013, with the second and third phases expected to reach commercial operations in the second and third quarters of 2013, respectively. Power generated from Ivanpah will be sold to Southern California Edison and Pacific Gas and Electric, under multiple 20 to 25 year PPAs. Ivanpah has entered into the Ivanpah Credit Agreement with the Federal Financing Bank, or FFB, which is guaranteed by the United States Department of Energy, or U.S. DOE, to borrow up to $1.6 billion to fund the construction of this solar facility. On June 10, 2011, the U.S. Fish and Wildlife Service, or FWS, issued a revised biological opinion allowing the Bureau of Land Management to lift its temporary suspension of activities order with respect to the Ivanpah Project, thus allowing those aspects of the project which were delayed to proceed.

Who is this Federal Financing Bank who had enough cash on hand and chutzpah to lend the money? Complete with an extra $225-million to cover shortfalls even before breaking ground?

Here is the FFB’s website, where heaps of bureaucratese confuse even the most diligent reader. Wikipedia, expressing its institutional tilt toward energy statism and global warming alarmism, regularly scrubs its FFB entry of everything not on the government website. But Fox has published some long analysis. And here’s what the Center for Public Integrity offers.

As you can see, the FFB is owned by taxpayers. It borrows freshly counterfeited dollars directly from the Federal Reserve Bank and “gets them into the economy” in a damaging and incomplete expression of ideas made famous by World War I British economist Maynard Keynes (incomplete because Keynes’ theories called for governments that stimulated a sluggish national economy by borrowing money to pay it back quickly after the economy was stimulated)..

On page 157 of the 2011 NRG Annual Report form 10-K, you’ll find this summary:

On April 5, 2011, NRG acquired a majority interest in Ivanpah, as discussed in Note 3, Business Acquisitions and Dispositions. On April 5, 2011, Ivanpah entered into the Ivanpah Credit Agreement with the FFB to borrow up to $1.6 billion to finance the costs of constructing the Ivanpah solar facilities. Each phase of the project is governed by a separate financing agreement and is non recourse to both the other projects and to NRG. Funding requests are submitted to the FFB on a monthly basis and the loans provided by the FFB are guaranteed by the U.S. DOE. Amounts borrowed under the Ivanpah Credit Agreement accrue interest at a fixed rate based on U.S. Treasury rates plus a spread of 0.375% and are secured by all the assets of Ivanpah. Ivanpah intends to submit an application to the U.S. Department of Treasury for a cash grant; any proceeds received will be utilized to repay the borrowings that mature in 2014.

That bit about “non-recourse” means if the company welshes on the loan, us taxpayers are out of luck. We won’t be able to foreclose on any of NRG’s bank accounts or conventional power generation plants.

That last sentence, by the way, is where this year, Americans are being asked to write off the first third of the FFB loan – that’s the “cash grant” NRG references in the last sentence.

My conclusion is that the Ivanpah plant was not built with money borrowed under a federal government loan guaranty – it was built with taxpayers’ money, loaned by a bunch of administrators who don’t have any heartburn about loans going bad.

Yesterday Barclay’s said about Nevada…

The British bank downgraded US utilities due to the threat that solar PV generation and battery storage will cause customers to quit – and considers Nevada one of the first places for that to actually happen. The ratings downgrades will increase borrowing costs, which will be paid by consumers.

Barclay’s specifically predict household energy independence will become the smartest economic move in Nevada within the next three years, in part because we have already artificially increased our grid-electricity cost with alternative energy mandates. Most states haven’t done that, so their grid electricity is cheaper, and solar PV/storage will have to get cheaper to work for their residents. Barclay’s says for Nevada, we’re almost there.

April Monthly Report on Ivanpah Released

The new Ivanpah Solar Electric Generating System has been demonstrating it’s generating ability the past few weeks. They had it turned on high Sunday, Monday, Tuesday of this week, based on the high production of solar thermal on those days (see each day’s respective Daily Renewables Watch document here). This picture is from the first of those three days (Sunday, May 25, 2014).photo_may252014

This week, Ivanpah filed its Monthly Compliance Report with its California State Regulator. It is 1,131 pages long.

I haven’t been through it, but longtime critics of the industrialization of the desert, Basin & Range Watch, has. They published this report on Monday. They note an airplane pilot blinding from accidental, misdirected reflection; wildlife carnage from probably coyotes and bobcats that are either trapped inside or penetrating the fence built to keep wildlife outside; a couple of dozen missing yet transmittered tortoises, and a hundred dead birds.

The same day as the Monthly Compliance Report was filed, the meeting notes for the Bird & Bat Committee were posted. Warning – don’t read it if you’re squeamish.

Ivanpah Solar Thermal Generator Output

IvanpahRunningThe California ISO is the manager of California’s “grid” and keeps track of the quantity of electrical energy contributed to the “grid” by each category of alternative energy, and started reporting solar-thermal separate from solar (photovoltaic) in late 2012. From that time, solar-thermal has been dwarfed by the much more robust solar PV generation. As well, solar PV generation has exploded, with the price of rooftop systems falling so rapidly that utilities are starting to notice decreases in demand.

The data allows us to get a feel for how the Ivanpah Solar Electric Generating System is coming along getting integrated into the grid, because Ivanpah is so much larger than all the rest of the existing solar-thermal production entering California’s grid. The company hasn’t updated its progress reports online for many months, so the production data is helpful gauging its technical success.

Here’s raw production of solar thermal, three-day average for smoothing, since the shortest day of the winter…

My amateur’s reading of this data starts with an assumption that the half-gigawatt/hr fairly consistent production at the end of December is the “background” non-Ivanpah sources of solar thermal, and that it’s reasonable to double that for the May background activity due to longer days.  The rest must be Ivanpah.

The detail data shows that the background level was consistent through the new year, then on January 2 the background level was joined by an extra two and a half gigawatts of solar thermal, for a total of three gigawatts produced that day. Here’s the Cal ISO Daily Watch for that day.  There may be some year-end New Years Weekend accounting anomaly at play, because it shows ST producing far into the winter darkness, a rare event. It did happen on January 2, 2013 as well.

Then, radio silence. ST production plummets and stays down for a while. Perhaps bringing the first 2.5 gigawatt/h per day broke the ST connections to the grid.

The world got back to normal around Feb 1. Halfway through the month, they brought another big burst online each day for a week or so, took a week off to assess how everything performed (PV numbers dipped hard at the point too), then ran between 1 and 1.5 GW/hr per day more or less permanently. Around the beginning of May, and again in the middle of May, output increased to 4.5 GW/hr per day – more Ivanpah?

The loudest voices in the fray seem to be nailing down solar-thermal’s coffin. They say Chinese engineering and manufacturing advances have caused photovoltaic costs to fall rapidly. Large scale PV is now almost 20-percent cheaper than solar-thermal, and does less environmental damage.

There’s some question about the wisdom of large scale energy generation in general, even aside from the man-made-climate-change conclusion that has been driving the discussion.

Orphaned Grid Costs Claw At Your Wallet

From this Bloomburg Businessweek story:

The shift toward distributed rooftop power hasn’t yet made a big dent in the profits of large utilities, but they’re beginning to feel the bite. Arizona’s largest utility recently reported quarterly electricity sales had dropped 1.3 percent from a year earlier, in part due to distributed generation. To head off the threat of rooftop solar, utilities in at least five states have asked regulators to begin taxing rooftop solar installation or tacking on fees to connect to the regular grid in order to recoup lost revenue.

The problem is your monthly electric bill isn’t just the number of kw you use times the per kw rate, although they present it to you that way. Behind the scenes, your utility pays less for the electrons than it sells them to you, and uses most of the “profit” to pay for expanding and maintaining the grid. So if you go solar on your roof, you no longer use – nor help pay for – maintaining the grid. And the grid costs the same as it did before you left it.