Touted as the world’s largest solar power plant, the 392-MW Ivanpah concentrating solar project in California’s Mojave Desert is underperforming and seeking a federal bailout on top of federal subsidies to build the project. Owned by Google and NRG Energy, Ivanpah was built with a $1.6 billion U.S. Department of Energy loan in 2011, out of a total capital cost of about $2.2 billion.
Now, reports the Wall Street Journal, the libertarian Cato Institute, and Fox News, the project is in financial trouble, asking the Treasury Department for a $539 million tax break to make the payments it owes on its DOE loan. So far, the Journal reports, Ivanpah has stiffed the government on loan payments of $132 million due in February, $159 million due in June, and $117 million due in October, or a total of $408 million in arrears. The government has allowed all of the payments to slide.
Now, Ivanpah has asked Treasury, under the Section 1603 cash payment program, which can reimburse projects up to 30% of their costs with tax credits, to apply that sum to its overdue federal loan payments. NRG spokeswoman Michelle Tsai said last fall that “it takes time to prepare and file the applications and for Treasury to approve and pay them. The original bridge loan due dates that were set in 2011 did not allow sufficient time for this to happen.”
According to the Cato Institute, “DOE actually requires Ivanpah to apply [to Treasury] for a tax credit to aid loan repayment.” How bizarre is that? If the project can use tax credits to pay off its loans, the government can then say – with a straight face – that the project is in its good graces.
Ivanpah now says the problem isn’t necessarily the timing of the payments, but that the plant isn’t generating enough power to make the money it needs to pay back the loans. Greentech Media reported, “From January to August of this year, the 392-MW plant generated far less than the electricity expected.” Fox News, citing Energy Information Administration data, wrote that the project has only generated a quarter of the power it was projected to provide from January through August.
Weather is the culprit, according to the plant’s operators. The period of the California drought apparently was also a period of overcast skies over the Mojave Desert. Also, according to plant officials, unspecified equipment “issues” hurt the plant’s performance.
In addition to its physical and economic under-performance, Ivanpah has had a troubled history on environmental grounds. According to the Los Angeles Times, the plant has had to spend some $50 million to mitigate threats to the endangered, and slow-moving, desert tortoise. Also, critics charge that the project is killing thousands of birds with its intense heat beams from a vast field of mirrors concentrated on the plant’s solar power tower. The plant, say critics, fries the birds in flight. The project developers say the bird kills are exaggerated.
Ivanpah, to my mind, is another example of why federal subsidies to energy projects of all stripes are a bad idea. That’s particularly true when the projects are directed to commercial operations instead of basic research. The Cato Institute commented, “The process is absurd. First, the government uses tax dollars to provide a loan guarantee to a risky firm. Then, it functionally forgives a large share of the outstanding balance after providing a large tax credit. This is an unjustified giveaway to investors in Ivanpah and a horrible deal for taxpayers.”