US Interior Dept Approves 1,000-Megawatt Solar Project

Oct 27, 2010 -- Dow Jones - Energycentral

The Obama administration on Monday said it has approved a permit for what will be the world's biggest solar power plant, driving home an election-year message that renewable energy is a source of jobs.

The U.S. Interior Department announced that it has approved a permit for a 1, 000-megawatt solar project on federal land in the desert near Blythe, Calif. The $6 billion project is being developed by Solar Trust of America, a joint venture between Germany's Solar Millennium AG (S2M.XE) and privately held Ferrostaal AG.

"The Blythe Solar Power Project is a major milestone in our nation's renewable energy economy and shows that the United States intends to compete and lead in the technologies of the future," Interior Secretary Ken Salazar said in a statement. "This project shows in a real way how harnessing our own renewable resources can create good jobs here at home." The Obama administration has been criticized over the past year for hurting job creation by holding up coal- mining permits and suspending deepwater drilling in the Gulf of Mexico after the worst offshore oil spill in U.S. history. The permit announced on Monday, the sixth to be approved, cuts against those criticisms, allowing the Obama administration to claim that it plans to create 1,066 jobs at the peak of construction and almost 300 permanent jobs to operate the facility.

The federal approval would allow Solar Trust to start construction on the plant this year and take advantage of government incentives that would reduce the cost of the project. In order to receive cash grants in exchange for unused tax credits, a popular but expiring program, companies must break ground on projects or spend 5% of construction costs by year's end.

The estimated cost of the first two units of the Blythe plant is $3 billion. If the U.S. Energy Department and the U.S. Treasury Department approves the cash grant at that cost, it would mean a $900 million cash grant in lieu of the tax credit.

The 1,000-megawatt project is one of nine large solar-thermal power plants the California Energy Commission has approved or plans to approve by the end of the year. Together they should generate enough power to serve about 800,000 homes. Unlike familiar photovoltaic solar panels, solar-thermal plants utilize curved mirrors that direct the sun's heat to a central tube in which steam is generated to drive turbines.

The federal approval would allow Solar Trust to start construction on the plant this year and take advantage of government incentives that would reduce the cost of the project. In order to receive cash grants in exchange for unused tax credits, a popular but expiring program, companies must break ground on projects or spend 5% of construction costs by year's end.

Solar Trust plans to start building a service road in mid-November that will allow construction and equipment crews to access the desert site from Interstate 10, company spokesman Bill Keegan said Monday.

Driving demand for solar energy is a state mandate that requires utilities to get one-third of their power from renewable sources by 2020. The projected solar power boom, which also includes the construction of several large photovoltaic solar panel farms, is widely expected to create thousands of jobs in the economically hard-hit state.

Solar Trust is awaiting approval from the U.S. Energy Department for a federal loan guarantee for the first two of four total units. Deutsche Bank AG (DB, DBK.XE) and Citigroup Inc. (C) are working with Solar Trust to obtain project equity and tax equity investment, Keegan said.

The company estimates the solar project will create about 7,600 construction and manufacturing jobs.

State and federal regulators pledged last year to work together to fast-track approval for a raft of large solar power projects to enable developers to meet a Dec. 31 deadline required to take advantage of federal financial incentives.

Renewable-energy developers have been pressing federal lawmakers to enact legislation to extend the cash-grant program, which they say greatly expands their financing options, allowing them to build more projects.

-By Siobhan Hughes and Cassandra Sweet, Dow Jones Newswires; 415-439-6468; cassandra.sweet@dowjones.com