Is First Solar gaming the system? Getting $456 million U.S. loan guarantee to develop low-risk Ontario projects indicates as much

So, I’m reading Bloomberg News and come to this headline: “First Solar Gets $455.7 Million Guarantees For Canada Plants.” Found the official corporate press release here.

I had to do a double-take. The world’s largest maker of thin-film solar modules, a company approaching $4 billion in annual sales and with a market cap of $8 billion, is getting nearly half a billion dollars in loan guarantees from the Export-Import Bank of the United States to develop seven solar projects totaling 90 megawatts in southwestern Ontario, Canada. According to the bank, the transaction constitutes the “largest financings in history supporting U.S. solar-energy exports to any country.”

“The Bank’s support was needed because viable long-term financing for these projects was not otherwise available in the commercial marketplace,” according to First Solar’s press release.

Wha? What a load of crap. There’s low risk to First Solar in doing these projects. It’s a large company with a strong balance sheet. It already has built more than 100 megawatts of solar in Ontario so it now has a track record. And, on top of that, it is being guaranteed 42 cents per kilowatt-hour under a 2o-year power purchase contract secured through Ontario’s older Renewable Energy Standard Offer Program (RESOP). As history indicates, it is building these projects then turning around and flipping them for an immediate profit, yet it will have 18 years to pay off the low-interest loans secured with the help of these loan guarantees. This company doesn’t need the help. If I were a U.S. citizen, I’d want these guarantees directed at companies that did need it or at least to projects in regions that carry less certainty and more risk.

This deal also highlights a big problem in Ontario. First Solar, when it’s done, will have built more than 200 megawatts of solar in Ontario but not as part of the feed-in-tariff program. You see, it hates the feed-in tariff program and supports protests from Japan, the EU and the U.S. against Ontario’s local content rules. Yet, ironically, it has been the most to benefit in the Ontario solar market. You see, all of its contracts were secured under the older RESOP program. This program had no local content rules, so First Solar brings very little with respect to job creation in Ontario. It’s painful to see at a time when Ontario has lured 18 solar module manufacturers with its newer FIT program but has failed to turn huge demand into finished projects connected to the grid. The Ontario Power Authority has offered contracts to more than 1,300 solar projects in Ontario but so far only 10 megawatts are in operation because of footdragging by Hydro One, an overly bureaucratic environmental permitting process, and political uncertainty — no thanks to Tim Hudak’s pledge to kill the program if elected.

Behind the scenes, however, First Solar continues to build away, using solar gear manufactured across the border in Michigan and apparently under no time restrictions (unlike conditions of the FIT program). Meanwhile, First Solar’s costs have dropped dramatically in the four or five years since it secured its power-purchase agreements under the now-discontinued RESOP program, yet it will continue to rake in 42 cents for every kilowatt-hour it produces. Its profits will be huge, thanks to a poorly designed RESOP program that didn’t build-in time restrictions for projects and local content requirements.

On both sides of the border, somebody is being had. Ontario boasts having the largest solar PV installation in the world in Sarnia, but that site has absolutely nothing to do with the FIT program. It was built with little Ontario content, it was sold to a natural gas company (Enbridge), and now that construction is done there is little to tout in terms of local job creation.

The FIT program, by comparison, is a gem with respect to the conditions it places on developers. The RESOP, at least with respect to solar, has proven a disaster in retrospect. First Solar is laughing.

7 thoughts on “Is First Solar gaming the system? Getting $456 million U.S. loan guarantee to develop low-risk Ontario projects indicates as much”

  1. Somebody is indeed being had. The poor Ontario ratepayer.

    However badly designed RESOP may be, FIT contracts today are even more generous, despite the rates being set years later. FIT project developers presently get anywhere from 44.3 cents to 80.2 cents per kilowatt-hour (see The RESOP rate of 42 cents appears to be a relative bargain.

    What a mess our government has made of our electricity system!

  2. Good point… but First Solar can’t be compared to Solyndra, at least when comparing balance sheets and track records.

    I know some like to flag Solyndra as a way to generalize the solar industry and point out the risk of government support, but it’s helpful to point out similar success and failure in other industries that have received heavy government support, like, say, nuclear.

    People — for example — who criticize government support for solar and then ignore the public crutches given to the nuclear industry aren’t playing fair ball. Same goes for fossil fuels.

  3. Tyler, what public crutches. And especially in the case of U.S. loan guarantees. Solyndra got a free loan guarantee; Southern for its nuclear guarantee had to fork over tens of millions. The OMB nickel-and-dimed Unistar to the point that they just walked away from the Calvert Cliffs project.

    The biggest crutches of all are things like FIT rates. Who in their right mind would voluntarily pay 44+ cents per kWh for unreliable solar power, which requires massive backup from a gas plant that also has to be paid, when he could get reliable nuclear for one-seventh that price? And zero carbon?

  4. Nuclear: liability caps, loan guarantees, waste management, etc… First, to say nuclear is “one-seventh” the price is not only living in the past, it’s ignoring costs not reflected in that price. In other words, it’s wrong.

    Second, we’re not in the past. Last I checked, nuclear doesn’t come anywhere close to 6 or 7 cents a kilowatt-hour, despite industry claims. You have to compare solar to future nuclear, and you have to talk all-in costs instead of cherry picking on the rate. Also, solar is intermittent, not unreliable — big difference. As a technology, solar is much more reliable than nuclear — and safer — and it generates power when we need it most.

    Now, sure, solar is more expensive than nuclear — I’ll grant you that. But it’s more like twice as much, not seven times as much. The FIT is designed to be scaled down, and within five years or so solar will be down below 20 cents per kilowatt-hour — well before any new plant at Darlington could be finished and highly competitive with nuclear, but without the toxic baggage. Unlike nuclear, solar costs are coming down, not going in the opposite direction.

    Ontario would be wise to consider refurbs, because they are more cost effective, but selling new builds as the cheaper option is a lie. In any event, the discussion shouldn’t be solar versus nuclear, as a diverse power mix is always the best option.

  5. There were some innovative technologies granted loan guarantees that have recently been abandoned because of the falling rates for PV , or reported to be abandoned for that reason.

    I’d be curious on your view on the developments with CSP projects being dumped for PV, as mentioned in an article at

    It strikes me that incentives are displacing tech that could match demand much more closely, and replacing it with cheapest ‘renewable’ total annual output.

    But I’m sure you are far more familiar with the tech than I.
    Was CSP a loser?

  6. Steve –

    I do not think we can list a price for nuclear power and not consider the lives lost during nuclear accidents. Those, I am afraid, are part of the costs – ask the families of those involved.

    Similar deal with oil. The wars being fought, in addition to the negative health and environmental effects are all costs that we fail to include in the true cost of “power-based” power when we talk about 15cent a kw-hr at the outlet.

    How many lives have been lost over solar power??

    As you well know, the FIT program is designed to spike demand initially and then ratchet back over time. Think about the jobs this program is creating right here in ON, along with the good we are doing to the environment, for our future generations.


Comments are closed.