Energy Secretary Steven Chu announced last month that the Department of Energy would guarantee a loan to support solar panel construction on rooftops across 28 states. The project, financed by Bank of America Merrill Lynch, would install 733 megawatts of solar panels on commercial buildings – enough energy to supply 88,000 homes. NRG Energy, a power supplier based in Princeton, New Jersey will be the lead investor in the first stage of the project: 15 megawatts worth of power to be installed in Southern California. Prologis Inc., an industrial real estate developer, will provide rooftop space and hold equity in the project.

The undertaking is known as Project Amp and is estimated to cost $2.6 billion over a four year period. The DOE, using funds from the 2009 stimulus bill, has set aside $1.4 billion to underwrite Bank of America’s project debt. The guarantee is meant to advance the DOE’s SunShot Initiative which aims to reduce the cost of solar energy by 75 percent in 2020 (this initiative also offers funding opportunities for small businesses who operate in the photovoltaic sector). By guaranteeing loans and subsidizing projects the DOE hopes to foster new technologies and innovations in the marketplace.

The scale of the project is unprecedented and represents the biggest effort ever to make solar energy available to the grid. “The program will nearly double the amount of grid-connected solar [power] online in the United States today and make another positive contribution to cleaner air and a healthy environment,” said Tom Doyle, president of NRG Solar.

Project Amp is indicative of a broad swing away from centralized power generation in the US. Over the last ten years power companies have been increasingly moving toward buying power from small-scale sources such as solar panels and wind turbines. At the same time other technologies have also come on the market.

Cogeneration (also know as “combined heat and power” or CHP) is the concept of providing heat and electricity simultaneously from the same power plant. While this technology has been in existence for many decades (think steam heating), it is now cost effective to apply it on a micro scale. Building complexes use natural gas to generate their own electricity and capture the heat from these generators to heat their buildings.

Utilities are increasingly taking advantage of CHP and solar technologies to diversify and localize their sources of power. This phenomena is know as Distributed Generation. It is becoming a more and more attractive option for power providers who own aging power plants and do not have the capital to spend on capital-intensive infrastructure. The cost of mining and transporting inputs, such as coal, has soared in the last half century and may yet increase. Likewise, transmitting electricity over long distances causes inevitable power losses. Producing power in the same community in which you sell it, without having to build a huge plant, has several advantages.

At the Renewable Energy Finance Forum, which concluded June 22 in Manhattan, Keynote speaker Drew Murphy, Vice President of NRG Energy, declared: “We are now at a turning point in power generation… Distributed Generation is here.”

Reprinted with permission from The Green Economy