The $2 Billion DOE Solar Loan Guarantee Question (NEE, ABGOF, PCG, GOOG, TAN)

The U.S. Department of Energy has conditionally committed another $2 billion in loan guarantees for construction of two concentrated solar power (CSP) projects in southern California.  With all of the buzz around austerity measures being taken in the federal, state, and local levels here, as well as all of the overspending nations in trouble, the question that is not being asked is whether or not these loan guarantees should be made at all…  The Genesis Solar Project, led by a division of NextEra Energy, Inc. (NYSE: NEE), received $682 million in guarantees and the Mojave Solar Project, sponsored by Spain’s Abengoa Solar Inc. (OTC: ABGOF), received $1.2 billion in guarantees.

Both projects include a 250-megawatt CSP plant and combined the two plants will avoid emissions of nearly 700,000 metric tons of carbon dioxide annually. PG & E Corp. (NYSE: PCG) will purchase the power generated at both plants. The two plants will double the amount of US CSP-generated electricity.

The Genesis project uses proven scalable solar thermal technology and will employ about 800 workers during the construction phase of the project and 47 workers once the plant is in full operation.

The Mojave project is the first US utility-scale plant to use Abengoa’s new Solar Collector Assembly, which uses lighter materials and is less expensive to build and install. The more efficient solar thermal technology requires a smaller number of solar collectors, and the Mojave project will operate without any fossil fuel back-up system.

NextEra is the largest owner and operator of wind systems in North America with an installed capacity of about 8,300 megawatts of wind generation. It is also the largest generator of solar power in the US, generating 315 megawatts.

The Department of Energy has so far made loans or commitments for $32 billion to support 17 projects expected to produce 27 million megawatt-hours of electricity annually. Solar generation projects have received about a third of the total.

A major downside to large solar thermal plants is the amount of land they require. A 500-megawatt plant needs more than 3 square miles of space. BrightSource Energy’s huge Ivanpah project, also located in the Mojave Desert, requires nearly 6 square miles of land to accommodate its 392 megawatts of capacity. There are bound to be conflicts between environmental and energy interests when that much area is needed for a single project.

Some solar stocks were getting a slight boost at opening this morning on news that Google Inc. (NASDAQ: GOOG) has invested $280 million in a program of rooftop solar installations. Unfortunately, events in Greece and some weak manufacturing data have sent stocks generally lower since then.

NextEra’s shares are down about -0.2% this morning, at $55.77, in a 52-week range of $47.96-$58.98. The Guggenheim Solar ETF (NYSE: TAN) is off about -1.5%, at $6.79, in a 52-week range of $6.40-$9.34.

Paul Ausick