The Department of Energy (DOE) finalized a $337 million 1705 Loan Guarantee to Sempra Generation on Sept. 28 to support the innovative 150-megawatt first phase of its 700-megawatt Mesquite Solar project in Maricopa County, Ariz.

It was among the very last approvals made before the program closed on Sept. 30. The loan guarantee improves access to lower-interest rate financing for the project and should help such projects find easier access to project capital in the future.

“We really appreciate the support for our project based on the innovation in the project and [the DOE’s] commitment to pushing solar technology ahead,” said Jim Sahagian, vice president of Commercial Development at Sempra Generation. “We’re creating a lot of jobs. It’s clean energy for the western grid, and we feel very committed to the solar space.”

The project is unique in that it will use a water-cooled inverter. Almost all inverters in use today are air-cooled.

“Probably a good analogy is comparing an old VW with an air-cooled engine, to a modern water-cooled VW,” Sahagian said.

As inverters convert DC power from photovoltaics to grid-ready AC power, they generate heat.

“It’s challenging to dissipate the heat in the summer. The traditional way was to put the inverter in a house and use an air conditioner to cool the inverters,” he said.

However, using air conditioning to cool the inverters used a lot of extra energy. The water-cooled inverter will use less energy to keep the inverter cool and allows the system to put more energy on the grid. Sahagian said.

The project broke ground in the middle of 2011.

“We expect to complete construction on the project in 2013. It will create about 300 jobs at the peak in construction,” Sahagian said. “It will really be a boon to the local economy, so we feel positive about that.”

Sempra is the equity investor in the project. But the loan guarantee will help the company gain access to lower interest rates to support it, according to Sahagian.

“We think the solar technology industry is in the development stage right now in the U.S., and that’s why the DOE’s offered loan guarantees to stimulate this technology.”

The loan guarantees will also help future projects gain access to lower-cost capital.

“We think that as more projects such as ours are demonstrated, the commercial lenders that are out there that have traditionally lent to fossil fuels will get more comfortable with solar,” Sahagian said.

As they do, it will make such financing more liquid and help to lower interest rates such financiers are willing to lend at, he said.

Image courtesy of Sempra Generation.