In light of the recent talk about difficulties facing project finance, and the calendar of renewable investment conferences this fall, it's interesting to step back and look at how a large-scale solar power project was financed. Particularly note the similarity to how coal-fired power plants are financed. Solar and wind projects will have a harder time with financing in the months to come -- but so will every other type of large-scale power generation.

Mark McLanahan, MMA's SVP of corporate development, explained the arrangement between his company and the Air Force to build a 14 megawatt solar array in 2007.

"This is a typical power purchase agreement," he told enerG magazine's Vicky Boyd. "It' been used for decades in the U.S. as a mechanism for third-party financing of coal-fired plants. But it’s a very new application for solar PV generation and distribution."

According to the enerG article, "A new twist for solar power," MMA owns and operates the project, and takes advantage of the 30 percent federal investment tax credit (ITC), something the Air Force couldn’t do because they're a non-tax-paying entity.

Investors who provided the $100 million needed for Nellis needed to have a collective tax bill of $30 million to take full advantage of the ITC.

"As soon as you break $50 million, you tend to tap into institutional capital that is available in the United States," McLanahan said. "The list of individual firms and investment houses in the United States that have that type of tax liability is relatively small. MMA obtained financing commitments from Citi, Allstate and John Hancock Financial Services, with Merrill Lynch providing construction financing.

The Air Force is able to purchase the solar electricity at a guaranteed fixed rate, saving the military base about $1 million annually, Boyd reported.