Financing solar thermal power plants

The commercialization of concentrating solar power technology took a major step forward in the mid 1980s and early 1990s with the development of the SEGS plants in California. Over the years they have proven that parabolic trough power technologies are the most cost-effective approach for commercial scale solar power generation in the sunbelt countries of the world. However, the question must be asked why no additional solar power plants have been build following the bankruptcy of the developer of the SEGS projects, LUZ International Limited. Although many believe the SEGS projects were a success as a result of parabolic trough technology they employ, in truth, the SEGS projects were developed simply because they represented an attractive opportunity for investors. Simply stated, no additional projects have been developed because no one has been able to put together a similarly attractive financial package to potential investors. More than $1.2 billion in private capital was raised in debt and equity financing for the nine SEGS plants. Investors and bankers who make these investments are the real clients for solar power technologies. They are not interested in annual solar to electric efficiencies, but in risk, return on investments, and coverage ratios. This paper will take a look at solar power projects from the financier’s perspective. The challenge in moving forward is to attract private investors, commercial lenders, and international development agencies and to find innovative solutions to the difficult issues that investment in the global power market poses for solar power technologies.