Energy Subsidies

Solar Plant Wants to Pay Off Massive Government Loan with Massive Government Grant


Burns more bucks than birds.
Credit: Aioannides

American taxpayers are on the hook for the Ivanpah solar project out in the California Mojave Desert close to the border of Arizona Nevada. The massive plant received $1.6 billion in loan guarantees from the Department of Energy to build it, out of a total cost of about $2.2 billion.  

The plant went online in December of last year. After operating for most of 2014, the plant seems to have hit a significant problem. It's only producing about a quarter of the power it has promised. That could present a bit of a challenge paying back its loan. So what are they doing? Why they're asking for a federal grant, of course. That is to say, they are asking for taxpayer dollars to pay back the loan that they got from the federal government that is guaranteed to be paid back with taxpayer dollars should the project fail. Fox news has the details, with some contributing analysis by Reason Foundation Vice President of Research Julian Morris:

After already receiving a controversial $1.6 billion construction loan from U.S. taxpayers, the wealthy investors of a California solar power plant now want a $539 million federal grant to pay off their federal loan.

"This is an attempt by very large cash generating companies that have billions on their balance sheet to get a federal bailout, i.e. a bailout from us—the taxpayer for their pet project," said Reason Foundation VP of Research Julian Morris. "It's actually rather obscene."

The Ivanpah solar electric generating plant is owned by Google and renewable energy giant NRG, which are responsible for paying off their federal loan. If approved by the U.S. Treasury, the two corporations will not use their own money, but taxpayer cash to pay off 30 percent of the cost of their plant, but taxpayers will receive none of the millions in revenues the plant will generate over the next 30 years.

Indeed, given that these guys are selling electricity to power companies, we don't even get the electricity! Taxpayers were obligated to gamble their money with the loan, may possibly have to give money to pay back the loan, and then Californians have to pay for the electricity the company produces.

Fox contacted Morris for their story because the Reason Foundation (publishers of this website and Reason magazine) produced a report at the end of 2013 detailing all the cronyism of the Department of Energy's renewable energy loan guarantee project. Read more of their research here.

The plant blames the weather for the underperformance of the solar plant. It just wasn't sunny enough in the middle of the desert, in California, amidst a severe, record-breaking drought. Okay, perhaps that's not quite fair. As a former desert-dweller, I know you could see cloud cover frequently in the desert without ever getting rain. But as a former desert-dweller newspaper editor, I also actually met with representatives of the plant's developers prior to its construction years ago. They made no bones about it: This solar project would not be built without that big federal loan. It would not have happened. Perhaps private investors suspected their output predictions were a bit too sunny?

And one final, somewhat amusing note: How is the plant making up for problems with collecting sunlight to produce energy? It has gotten permission from the government to use more natural gas than it had originally planned, potentially meaning that the biggest solar thermal power station in the world may depend on fracking to supplement part of its operations.  

Oh, and it murders birds by the hundreds, possibly thousands. Maybe they can supplement their losses by opening a barbecue shack next to Interstate 15?