Renewables:

SolarReserve's Smith discusses company's progress on loan-guarantee-funded project

As the debate over government loans for renewable energy projects continues, what impact could the elimination of these loans have on the solar industry? During today's OnPoint, Kevin Smith, CEO of SolarReserve, discusses progress on his company's Crescent Dunes project and explains why he believes government loans are needed to advance research and development for solar technologies. He also weighs in on last week's Commerce Department decision on an anti-dumping tariff for solar panels coming out of China.

Transcript

Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Kevin Smith, CEO of Solar Reserve. Kevin, thanks for coming on the show.

Kevin Smith: Thanks. Thanks for having me.

Monica Trauzzi: Kevin, last week Solar 3D president Jim Nelson testified before the House Oversight Committee and he blasted the government support of Solyndra and insisted that the government should rely on the market to decide who winners and losers are in a particular technology. Do you think it's possible for a solar company that's involved in R&D to make its way and to survive without the help of loans from the government?

Kevin Smith: Well, I think you've got to maybe take a step back and look at the overall statement. The overall statement is let the markets decide, OK? Energy is about as important as it gets in the U.S. and we have never really let the markets just decide. I mean for decades and decades oil, natural gas, nuclear, coal have received billions and billions of dollars in subsidies and still get those subsidies today. So the natural gas industry, the coal industry, the nuclear industry and the oil industry still receive subsidies today. They've received hundreds of billions of dollars in subsidies over the last 50 years. So to kind of then go to the renewable energy industry and say, you know, yes, we've subsidized all these other energy industries because they were important to the U.S. and now we're going to let the renewable energy industry make their own way, really doesn't make a whole lot of sense right now. You know, if you want to cut the subsidies from the other established industries, like oil and natural gas and coal and nuclear, great. And then we can look at nuclear, kind of the big subsidies that they're getting, but, you know, certainly solar and wind I think are critical industries to go forward and they should receive the same level of support that the other fossil fuels have received.

Monica Trauzzi: But let's say you did level the playing field and you took those subsidies away from oil and gas, could solar do it without these subsidies and these loan guarantees?

Kevin Smith: Yes, I think they can for a number of reasons. One is if you -- you've got to look long term, OK? So the difficulty that we've had as a nation is we look at today's price of oil, today's price of natural gas and you've really got to look long term. I mean these markets and these projects are long-term projects. I mean we're building projects that are 20 to 25-year or 30-year projects. And to kind of say, OK, what's the price of a solar project today versus the price of a natural gas project today, when a natural gas project is going to have 20 or 30 years of fuel cost with escalation in those fuel costs, same thing with oil, same thing with nuclear and coal, you've really got to look longer term, as opposed to just saying, OK, can they compete today? You know, you've got to take a long-term perspective and make energy decisions that are long term.

Monica Trauzzi: So, let's talk about how your company is playing into this discussion. The Energy Department has given your company a $737 million loan guarantee. Why does your company choose to apply and move forward with this loan?

Kevin Smith: Well, I think it's important to identify that the loan guarantee didn't come to Solar Reserve. The loan guarantee went in to build a project, so it went into a project that has other large-scale investors into that project. So, we're building a project at, you know, a $960 million project utilizing the loan guarantee as well as we raised an additional $250 million in equity from private sources. And we're building a project. That project has a 25-year power contract to sell 100 percent of its output with the largest utility in Nevada, NV Energy. So it's an ability of the U.S. government to kind of take a step forward on large-scale renewable energy and really kind of lead the market on solar, solar thermal technology. And so I think that's a critical part, a critical part that government can play in advancing clean energy technology in the U.S.

Monica Trauzzi: You really view this project as an example of a loan guarantee success, but has Solyndra and the Solyndra case ever given you any pause in terms of your company's ability to make good on this loan that the government has given?

Kevin Smith: Well, you know, Solyndra is a completely different model. I mean Solyndra was a manufacturing facility and I think it's important to recognize that the loan guarantee program is a fairly wide-reaching program, different types of technologies in different industries. And there are going to be some failures. I mean that's unfortunate that there's failures in the industry, but, you know, that's kind of the way it works. If you were only picking 100 percent winners, then you're probably not being a bit cutting edge enough. So we've, you know, we have a project that is a completely different business model than the Solyndra model. It's a long-term power contract with the utility. We've got 100 percent of our revenues in place for 25 years. So, you know, we're really looking at the -- and the government is looking at it on the play that, you know, not only is it a loan guarantee, but they're going to receive about $300 million in interest payments. You know, return of our debt into the -- from the project, as well as $300 million in interest payments that are going to be made into the project, as well as advancing clean energy technology in the U.S.

Monica Trauzzi: Talk a bit about the specific technology that's being used on this project.

Kevin Smith: The technology that we have is what's called molten salt power tower, so it's different than photovoltaic technology, which is the PV panels that you see on roofs. This is really a large-scale power facility that generates electricity on a utility scale basis to sell into the grid. And essentially it's a large tower. At the top of the tower is a heat exchanger and a fluid runs through that heat exchanger. That heat exchanger is surrounded by a huge field of mirrors, 10,000 kind of billboard-sized mirrors, focuses the sun's energy atop of that tower and heats up the liquid which utilizes molten salts. And the reason why we utilize molten salt is it stays a liquid at 1000°F. So we heat up this liquid to 1000°F, we store it in a large tank on the ground and then when we want to generate electricity, which we can do 24 hours a day utilizing that solar energy that we've now stored in molten salt, we can provide 110 megawatts of electricity, which is enough energy for about 75,000 homes. And we can do it 24 hours a day with solar energy. So, that's the basic of the technology. This is the first commercial scale facility in the world and the largest facility that will be built worldwide and it really sets the standard for energy storage with solar.

Monica Trauzzi: In other solar news, last week the Commerce Department gave its preliminary determination on the anti-dumping tariff for solar panels coming out of China. Is this good or bad for the industry?

Kevin Smith: Boy, that's a tough one actually. I think it's a little bit of both. You know, I think it's great for the U.S. consumers to have a low priced supply of PV panels. I think it's -- you know, I think you look at the worldwide support for renewable energy, which is increasing. I think that's important for the energy sectors generally. You know, the view that the U.S. government has taken that we've kind of -- that the Chinese have kind of been a bit too aggressive on their support for renewable energy. You know, it's really kind of difficult to kind of, you know, evaluate that properly. I mean being in the -- being an energy consumer, I want low-price electricity. So if the Chinese are providing lower price PV panels than we can get from our own suppliers or from European suppliers or whatever, I think we, you know, we need to kind of look at those, at those activities and decide whether or not, you know, that's really good for the industry or not. When you also look at the U.S. solar industry, a large portion of the jobs created aren't necessarily in panel manufacturing. I mean even the U.S. suppliers, a lot of them have overseas manufacturing activities or probably most of them have overseas manufacturing facilities. And so a lot of the jobs created in the nuclear -- or in the solar industry are in installation, on maintenance, on services surrounding those, not necessarily just the PV panels. So, hopefully, it won't have a significant effect on the market, but, you know, we'll see as we go forward.

Monica Trauzzi: All right, we'll end it there. Thank you for coming on the show.

Kevin Smith: OK, thanks a lot.

Monica Trauzzi: And thanks for watching. We'll see better tomorrow.

[End of Audio]

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