U.S. Government loan program could attract 783MW in solar PV projects, say analysts

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Better than expected interest in applications for a new U.S. Department of Energy (DoE) loan program could generate 783MW or more in solar PV projects, according to financial analysts, Mark Bachman and Erik Olbeter from Pacific Crest Securities. The figure was arrived at by assuming 15% share of a US$750 million fund that supports US$8 billion in guarantees from selected financial institutions and a US$4.50/watt installed price. However, as the loan guarantees will apply to only roughly 34% of the project cost, the guarantees could actually support up to $24 billion of projects, the analysts noted.

The analysts noted that the program could have a bigger impact than previously believed, noting in a report that;

‘Conservatively speaking, this program is likely to lead to higher U.S. demand in 2012 and beyond, with the possibility of upside to our numbers in 2011 if program adoption is high in early 2010. The primary unknown is project permitting delays, which continue to delay the start of announced projects. Because the loan guarantees are revoked if the project does not start before October 2011, there may be some impetus to speed up the citing process, but that remains to be seen.’

The Pacific Crest analyst also cautioned that the costs associated with loan applications would mean that the solar projects coming out of the funds would be utility-scale and large commercial projects only.

Importantly, the banks would do the due diligence on all projects, speeding-up the process, compared to the Government doing the work.

‘Initial indications are very encouraging for a 2H2010 ramp in project announcements,’ noted the analysts.

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