The project is also a marvel in another, less obvious way: Taxpayers and ratepayers are providing subsidies worth almost as much as the entire $1.6 billion cost of the project. Similar subsidy packages have been given to 15 other solar- and wind-power electric plants since 2009.
The government support — which includes loan guarantees, cash grants and contracts that require electric customers to pay higher rates — largely eliminated the risk to the private investors and almost guaranteed them large profits for years to come. The beneficiaries include financial firms like Goldman Sachs and Morgan Stanley, conglomerates like General Electric, utilities like Exelon and NRG — even Google.
A great deal of attention has been focused on Solyndra, a start-up that received $528 million in federal loans to develop cutting-edge solar technology before it went bankrupt, but nearly 90 percent of the $16 billion in clean-energy loans guaranteed by the federal government since 2009 went to subsidize these lower-risk power plants, which in many cases were backed by big companies with vast resources.
When the Obama administration and Congress expanded the clean-energy incentives in 2009, a gold-rush mentality took over.
As NRG’s chief executive, David W. Crane, put it to Wall Street analysts early this year, the government’s largess was a once-in-a-generation opportunity, and “we intend to do as much of this business as we can get our hands on.” NRG, along with partners, ultimately secured $5.2 billion in federal loan guarantees plus hundreds of millions in other subsidies for four large solar projects.
“I have never seen anything that I have had to do in my 20 years in the power industry that involved less risk than these projects,” he said in a recent interview. “It is just filling the desert with panels.”
From 2007 to 2010, federal subsidies jumped to $14.7 billion from $5.1 billion, according to a recent study.
Most of the surge came from the economic stimulus bill, which was passed in 2009 and financed an Energy Department loan guarantee program and a separate Treasury Department grant program that were promoted as important in creating green jobs.
States like California sweetened the pot by offering their own tax breaks and by approving long-term power-purchase contracts that, while promoting clean energy, will also require ratepayers to pay billions of dollars more for electricity for as long as two decades. The federal loan guarantee program expired on Sept. 30. The Treasury grant program is scheduled to expire at the end of December, although the energy industry is lobbying Congress to extend it. But other subsidies will remain.
The windfall for the industry over the last three years raises questions of whether the Obama administration and state governments went too far in their support of solar and wind power projects, some of which would have been built anyway, according to the companies involved.
Obama administration officials argue that the incentives, which began on a large scale late in the Bush administration but were expanded by the stimulus legislation, make economic and environmental sense. Beyond the short-term increase in construction hiring, they say, the cleaner air and lower carbon emissions will benefit the country for decades.
“Subsidies and government support have been part of many key industries in U.S. history — railroads, oil, gas and coal, aviation,” said Damien LaVera, an Energy Department spokesman.
A Case Study
NRG’s California Valley Solar Ranch project is a case study in the banquet of government subsidies available to the owners of a renewable-energy plant.
The first subsidy is for construction. The plant is expected to cost $1.6 billion to build, with key components made by SunPower at factories in California and Asia. In late September, the Energy Department agreed to guarantee a $1.2 billion construction loan, with the Treasury Department lending the money at an exceptionally low interest rate of about 3.5 percent, compared with the 7 percent that executives said they would otherwise have had to pay.
That support alone is worth about $205 million to NRG over the life of the loan, according to an analysis performed for The New York Times by Booz Company, a strategic consulting firm that regularly performs such studies for private investors.
When construction is complete, NRG is eligible to receive a $430 million check from the Treasury Department — part of a change made in 2009 that allows clean-energy projects to receive 30 percent of their cost as a cash grant upfront instead of taking other tax breaks gradually over several years.
Californians are also making a big contribution. Under a state law passed to encourage the construction of more solar projects, NRG will not have to pay property taxes to San Luis Obispo County on its solar panels, saving it an estimated $14 million a year.
Assisted by another state law, which mandates that California utilities buy 33 percent of their power from clean-energy sources by 2020, the project’s developers struck lucrative contracts with the local utility, Pacific Gas Electric, to buy the plant’s power for 25 years.
Eric Lipton reported from Washington and Clifford Krauss from Houston.
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