A couple of weeks ago, independent power producer sPower was finally able to secure financing for its massive Spotsylvania solar energy project.
The 620 MW solar project, the largest east of the Rockies, ran into a bevy of problems before construction got underway. Many of these problem were understandable social issues being raised by the communities surrounding the Virginia county the project is set to call home.
But, before community relations issues come into play, a project as massive as this one needs money above all else, or it will simply never get off the ground.
Where the cash comes from
The challenges of financing as large a solar energy project as the Spotsylvania one are immense. A mere solar loan won’t cut it. $350 million is a lot of money, no matter the situation, so finding that amount of funding will always be a challenge.
Moreover, the Spotsylvania project is facing financial challenges not dealt with by prior projects because of the unprecedented times we find ourselves in. The changes brought on by the global Covid-19 pandemic have not only crushed the finances of so many individual Americans, but it is beginning to look like the entire economic ecosystem will suffer. Banks will not be invincible to this looming recession, and with this in mind, any bank would be hesitant to offer $350 million in financing for the Spotsylvania energy project, as Wells Fargo has done.
In an economic downturn, banks typically tie off loose ends and reduce liabilities, not make investments worth hundreds of millions of dollars. The timing could not have been worse for the energy project to commence, but luckily they were able to secure a $350 million tax equity commitment from Wells Fargo.
The solar energy project will still face Covid-19-related challenges, even though sPower has secured this tax equity investment. No one knows how long this pandemic will last or how long social distancing measures will be in place. Because of this, construction on the Spotsylvania project could certainly hit various stand-stills and get delayed until further notice. And even during a delay, expenses could still be ongoing so there is a possibility that the $350 million from Wells Fargo won’t ultimately be enough if the project isn’t completed efficiently.
It would be prudent for those running the project to continue looking for additional sources of financing to be used in an unforeseen emergency.
Going forward, the biggest financial challenge for solar energy projects similar in scope to the Spotsylvania project will be putting together a detailed-enough plan to convince financial institutions to give them a large investment, despite the uncertain economic times we find ourselves in.
As for the social challenges of getting such a large solar energy project off the ground, it’s estimated that the Spotsylvania project will create 700 new jobs during its construction and another 20 to 25 full-time positions when the facility is operating. Additionally, the facility is predicted to offset 825,000 metric tons of carbon emissions each year.
Despite all of this, there has been a ton of pushback on the project, dating all the way back to 2017. With the facility planning to operate on 6,300 acres, unsurprisingly, there have been issues raised against the intrusiveness of the project. For example, local residents have complained about the project failing to set up staging areas, disturbing land too close to three graves and work on the project crossing over into a 100-foot vegetative area that is supposed to serve as a buffer zone between the panels and the people.
And while three of these complaints have since been resolved, the issues represent the challenge of getting a community to embrace such a massive project..
Environmental concerns have also been raised by community members, despite the project being solar. For example, residents have argued that the necessary removal of acres of carbon-reducing trees to complete the project will hurt the environment and intrude on the privacy of citizens. Moreover, most of the output from the solar facility will not be used for residential homes, but for big customers like Microsoft, Apple and the University of Richmond.
More pertinent, a lawsuit was filed by a neighboring county that claims the big trucks used on the project site are having a damaging impact on rural roads. Orange County argues that its roads should not be used for the project, but only roads in Spotsylvania County.
And finally, the largest section of the solar power project had been temporarily stalled due to concerns about how such a massive solar farm would disrupt the land, bring down property values, and harm the environment. This section was 80% of the entire project and a vote in early April by Spotsylvania County supervisors approved a special permit to utilize the land for the solar project.
In his role as Director of Communications at LendEDU, Mike uses data, usually from surveys and publicly-available resources, to identify emerging personal finance trends and tell unique stories. Mike’s work, featured in major outlets like The Wall Street Journal and The Washington Post, provides consumers with a personal finance measuring stick and can help them make informed finance decisions.
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