The High Cost of "Free" Solar Energy

What will it take for people -- Obama -- to understand that all energy is free at the source? It's converting it into a useful form that's expensive. Solar is way up there when it comes to conversion costs. Is anyone in Washington paying attention?

Is the Obama administration going to bail out Evergreen Solar? Not likely. Is Obama himself going to learn a lesson about real-world energy facts? Not likely. Is Obama going to wake up to the punishing costs of his energy dreams? Not likely.

Is the administration embarrassed about the total failure of the green energy industry? How about the fact that green energy is not "clean" energy? Solar panels contain some toxic materials that will eventually need disposal. Then what?

Nevergreen Solar
Another political investment goes bust

In 2008, Reuters published one of those stories predicting that green power would be cost-competitive with fossil fuels in five years. Headline: "As Energy Costs Soar, U.S. Looks to Solar."

Among the prophets was Richard Feldt, then the CEO of Evergreen Solar, who said that "it's not far away" and called for more subsidies. On Monday, Evergreen filed for Chapter 11 bankruptcy.

In the grave-dancing department, let's note that failure is part of the risk-taking and creative destruction that drive growth, and that Evergreen got its start in 1994 with an innovation that reduced the costs of silicon panels. The bankruptcy is notable mainly because the Massachusetts-based manufacturer received so much taxpayer support.

Governor Deval Patrick took a $58 million stake in Evergreen in 2007 with direct subsidies and tax breaks in return for the company building a plant in the state. The goal was "to help Evergreen Solar grow and thrive right here in Massachusetts, and give us a head start toward building a clean energy economy," Mr. Patrick said at the time.

But in January, Evergreen, shedding cash, shut down the Devens plant and fired 800 workers, claiming it was at a competitive disadvantage because U.S. solar subsidies are lower than China's. In a letter to the Journal, the U.S. solar lobby in Washington said the solution was to follow "Chinese policy makers" and make "strategic investments to attract this rapidly growing industry."

Mr. Patrick's economic development secretary, Greg Bialecki, told the Boston Globe that Evergreen's collapse was "a cautionary lesson," but not about the distortions and waste that come with the political allocation of capital. "We knew that it would be challenging to do that kind of manufacturing in the United States. It also probably suggests that Massachusetts can't do it alone—in other words, we probably also need federal policy," he said.

So the Commonwealth subsidies weren't enough for Evergreen to succeed because the federal subsidies weren't enough, even though with the stimulus the Obama Energy Department has become one of the largest venture capital firms in the world. And the federal subsidies will only be enough if Washington emulates the Chinese model of a state-planned economy.

As Evergreen's bankruptcy shows, the real story is that the government-as-investor model isn't going to lead the U.S. back to prosperity.

Solar Energy -- Where are the Blue Skies?

From the Department of This Isn't News:

Evergreen Solar files for bankruptcy, plans asset sale

Greg Turner and Jerry Kronenberg
August 15, 2011

Evergreen Solar Inc., the Massachusetts clean-energy company that received millions in state subsidies from the Patrick administration for an ill-fated Bay State factory, has filed for bankruptcy, listing $485.6 million in debt.

Evergreen, which closed its taxpayer-supported Devens factory in March and cut 800 jobs, has been trying to rework its debt for months. The cash-strapped company announced today has sought a reorganization in U.S. Bankruptcy Court in Delaware and reached a deal with certain note holders to restructure its debt and auction off assets.

The Massachusetts Republican Party called the Patrick administration’s $58 million financial aid package, which supported Evergreen’s $450 million factory, a “waste” of money.

“The bankruptcy of Evergreen Solar is another sad event for the Massachusetts company and highlights the folly of the Patrick-Murray Administration which has put government subsidies into their pet projects instead of offering broad based relief to all Bay State employers,” said Jennifer Nassour, head of the state GOP.

Greg Bialecki, Patrick’s economic development czar, defended the administration’s support for the once-promising Evergreen. The state is still trying to recoup about $4 million in cash from the Marlboro-based company.

“Not every company is going to be successful ... but we still believe the approach of providing business incentives to create and maintain manufacturing jobs in Massachusetts is an important strategy,” he said.

Evergreen — hurt by lower-cost competition in China and plummeting prices for solar panels — also said it will cut more jobs — 65 layoffs in the United States and Europe, mostly through the shutdown of its Midland, Mich., manufacturing facility. That would leave Evergreen with about 68 workers according to a head count listed in the bankruptcy filing.

To cut costs, Evergreen shifted some of its production to Wuhan, China, last year. That joint venture will remain operating subject to financing talks with Chinese investors.

In January, after Evergreen announced it would close the Devens factory, Patrick told the Herald he was disappointed in the job losses but did not regret making the investment.

“I think we did what we could have and should have,” he told the Herald.

In March, during a state Senate hearing that explored the value of tax incentives for Bay State businesses, Evergreen CEO Michael El-Hillow said the company had “earned” 85 percent of the taxpayer benefits it received because of the jobs it originally created.

Evergreen warned investors back in April that it was burning through cash because of slow sales, falling solar-panel prices and weak proceeds from the sale of Devens factory assets.

“Chapter 11 will provide Evergreen Solar with the ability to maximize returns for our stakeholders through the proposed sale process,” El-Hillow said in a statement. “Importantly, we expect to continue our technology development without interruption during Chapter 11 and the sale process.”

But Evergreen shareholders are expected to receive “no distributions” from the asset sales after creditors are repaid.

Shares of Evergreen, which are in danger of delisting from the Nasdaq Stock Market, plunged 57 percent today to 18 cents. The company launched in 1994 and went public in 2000.

Sunstroke hits Solar Energy

The impossible claims have been made. They've said it. Cheap solar power is just around the corner. But that's where it's always been.

GE Sees Solar Cheaper Than Fossil Power in Five Years

Solar power may be cheaper than electricity generated by fossil fuels and nuclear reactors within three to five years because of innovations, said Mark M. Little, the global research director for General Electric Co. (GE)

“If we can get solar at 15 cents a kilowatt-hour or lower, which I’m hopeful that we will do, you’re going to have a lot of people that are going to want to have solar at home,” Little said yesterday in an interview in Bloomberg’s Washington office. The 2009 average U.S. retail rate per kilowatt-hour for electricity ranges from 6.1 cents in Wyoming to 18.1 cents in Connecticut, according to Energy Information Administration data released in April.

GE, based in Fairfield, Connecticut, announced in April that it had boosted the efficiency of thin-film solar panels to a record 12.8 percent.

Improving efficiency, or the amount of sunlight converted to electricity, would help reduce the costs without relying on subsidies.

The company said in April that the factory will have about 400 employees and make enough panels each year to power about 80,000 homes.

Solar-panel makers from Arizona to Shanghai are expanding factories to add more cost savings that analysts say will sustain the industry’s expansion. Installations may increase by as much as 50 percent in 2011, worth about $140 billion, as cheaper panels and thin film make developers less dependent on government subsidies, Bloomberg New Energy Finance forecast.

Solar Costs Dive

The cost of solar cells, the main component in standard panels, has fallen 21 percent so far this year, and the cost of solar power is now about the same as the rate utilities charge for conventional power in the sunniest parts of California, Italy and Turkey, the London-based research company said.

Most solar panels use silicon-based photovoltaic cells to transform sunlight into electricity. The thin-film versions, made of glass or other material coated with cadmium telluride or copper indium gallium selenide alloys, account for about 15 percent of the $28 billion in worldwide solar-panel sales.

First Solar Inc. (FSLR), based in Tempe, Arizona, is the world’s largest producer of thin-film panels, with $2.6 billion in yearly revenue.

Smart Grid

Little also said the U.S. transition to a full smart grid will take “many, many years” to develop.

A complete smart grid would consist of millions of next- generation meters installed in businesses and homes, appliances that adjust their energy use when prices change, and advanced software to help utilities control electricity flows, he said.

“I think it’s going to be a long time before we can realize the full potential of the smart grid,” he said. “But it is coming.”

GE this year plans to introduce the “Nucleus,” a device that will let consumers track their household electricity use with personal computers and smart phones. The company also is investing in its appliance and lighting unit, including $432 million for U.S. refrigeration and design centers announced in October.

Utilities need to have incentives to put in place devices that save energy, and Congress needs to provide greater certainty on tax policy surrounding renewable energy, Little said.

Sun and Money

Solar-Panel Prices May Decline Less Than Expected

Sep 15, 2010

Prices for photovoltaic panels that convert sunlight into electricity may fall about 10 percent next year, less than analysts forecast, as European demand increases.

First-quarter prices will drop to an average of $1.65 a watt compared with $1.50 in the previous median estimate of five analysts surveyed by Bloomberg News. Analysts who contributed to the surveys included John Hardy at Gleacher & Co. in Connecticut and Sanjay Shrestha at Lazard Capital Markets.

This year, contracts may average $1.80 to $1.85 a watt, they forecast.

Prices have fallen for years as Chinese manufacturers such as Trina Solar Ltd. undercut European producers including Germany’s Solarworld AG. The forecast means $2.55 billion more in global revenue for manufacturers, based on expected sales of 17,000 megawatts of the devices. Sales may total $28 billion next year, calculations show, matching Exxon Mobil Corp.’s planned investment in oil and gas production in 2010.

“There will be price declines in the first half of 2011, though much less severe than last year given a healthier, globally diverse demand situation,” Hardy said in an interview.

That may increase the profit potential of the biggest low- cost producers, from Changzhou-based Trina Solar to First Solar Inc. of Tempe, Arizona, analysts said. Investors have begun to anticipate better earnings for some of the companies.

Shares Climb

Trina and Shanghai-based competitor JA Solar Holdings Co. have climbed 28 percent and 26 percent, respectively, in the last month, compared with the 7 percent gain of the 38-member Bloomberg Global Leaders Solar Index in the period. JA Solar rose 12 cents, or 1.6 percent, to $7.30 as of 12:17 p.m. today in Nasdaq Stock Market composite trading.

Developers have rushed to complete solar-energy projects ahead of planned declines in government incentives in Germany and Spain. At the same time, smaller markets expanded in France, the Czech Republic and the U.S. Increased orders will extend to 2011, when the analysts forecast sales to increase 20 percent.

Demand growth in Europe and North America will outpace higher production in Asia, Hardy and Shrestha said.

Evidence of currently reduced supply can be found in inventories and in some order terms.

Solar inventories fell 19 percent in the second quarter to 84 days and shipments “remained strong” in the third quarter, Hardy said.

Prepaid Contracts

JA Solar, a China-based manufacturer of solar cells and modules, last week agreed to supply 500 megawatts to customers in 2011 at undisclosed prices. The customers, who weren’t named, prepaid a portion of the contracts, JA Solar said.

“We’re a little surprised by the prepayments,” Paul Clegg at Mizuho Securities USA in New York, said in an interview. “That’s a bullish signal -- it indicates developers are concerned that shortages next year could drive prices higher.”

Spot prices for solar modules in Europe, of about $1.90 per watt, are trading higher than contract prices, indicating that demand continues to outstrip supply, said Dan Ries, an analyst at Collins Stewart in New York. That’s boosted sales from July to August at the six largest Taiwan-based cell makers, he said.

Concerns that sales in Germany, which accounts for about half the global market, will drop next year have faded as developers expand projects in France, Italy and North America.

“Demand in non-German markets appears to be much stronger than investor expectations,” Vishal Shah, an analyst at Barclays Capital in New York, said in a note to clients. “Activity in Germany has picked up over the last two weeks.”

Forecasts Tempered

Some analysts tempered their forecasts, saying that governments could change incentives and Asian factories can ramp up new production quickly.

France could set a cap on new solar installations next year that would limit growth in that market, and the Czech Republic can control solar costs and development through its licensing process, said Jenny Chase, head of solar research for Bloomberg New Energy Finance in Zurich.

“While European markets are stronger than we had thought, next year there continues to be a lot of uncertainty,” Chase said in an interview. “Chinese companies can add capacity very quickly to meet demand, which could push prices lower.”

Wind, Sun and Oil are Free

The Energy Illiterates fail to understand where the money for energy supplies goes. For some reason they think crude oil is expensive but the wind and sun provide their benificent energy free of charge. For some reason they think because they can feel the wind in their faces and the warmth from the sun that kilowatt hours of electricity are waiting around for a good green utility to send that energy to homes all over America.

It's the energy conversion process that costs, and it costs a lot. Moreover, even if we were able to achieve the theoretical peak conversion efficiency, the cost of wind and sun energy would cost many times the cost of crude oil at $80 a barrel. It's that simple.

The Price of Wind

The 'clean energy revolution' is expensive

The ferocious opposition from Massachusetts liberals to the Cape Wind project has provided a useful education in green energy politics. And now that the Nantucket Sound wind farm has won federal approval, this decade-long saga may prove edifying in green energy economics too: Namely, the price of electricity from wind is more than twice what consumers now pay.

On Monday, Cape Wind asked state regulators to approve a 15-year purchasing contract with the utility company National Grid at 20.7 cents per kilowatt hour, starting in 2013 and rising at 3.5% annually thereafter. Consumers pay around nine cents for conventional power today. The companies expect average electric bills to jump by about $1.59 a month, because electricity is electricity no matter how it is generated, and Cape Wind's 130 turbines will generate so little of it in the scheme of the overall New England market.

Still, that works out to roughly $443 million in new energy costs, and that doesn't count the federal subsidies that Cape Wind will receive from national taxpayers. It does, however, include the extra 6.1 cents per kilowatt hour that Massachusetts utilities are mandated to pay for wind, solar and the like under a 2008 state law called the Green Communities Act. Also under that law, at least 15% of power company portfolios must come from renewable sources by 2020.

Two weeks ago, U.S. Interior Secretary Ken Salazar approved Cape Wind, placing it in the vanguard of "a clean energy revolution." A slew of environmental and political outfits have since filed multiple lawsuits for violations of the Endangered Species Act, the National Environmental Policy Act, the Outer Continental Shelf Lands Act, certain tribal-protection laws, the Clean Water Act, the Migratory Bird Treaty Act and the Rivers and Harbors Act.

There's comic irony in this clean energy revolution getting devoured by the archaic regulations of previous clean energy revolutions. But given that taxpayers will be required to pay to build Cape Wind and then required to buy its product at prices twice normal rates, opponents might have more success if they simply pointed out what a lousy deal it is.

Your Money -- Gone With the Wind

What is it about solar power and wind power that gets people excited about how to spend Other People's Money? Why do these flying carpets continue to thrill investors?

Investing in solar and wind would make sense if the technologies offered an advantage in price or performance. But they offer neither. Solar power and wind power cost more than power derived from convention sources and this unfortunate financial reality will not change anytime soon.

Technical advances can change the picture for solar power. If conversion efficiency improves enough, it is possible for the cost of electricity from solar power to match the price of electricity from our coal-fired plants.

But no technology can turn night into day.

Supporters of solar power love to yammer about the vast untapped quantities of sunlight that bathe the Earth every day. However, Earth already depends on that sunlight to maintain natural processes.

The Greenists claim that humans are causing catastrophic damage to the atmosphere through burning oil, gas and coal. Clearly if we capture large amounts of sunlight and convert it into electricity we will upset Nature's balance in even more profound ways.

The wind may blow everywhere and may blow with considerable power, but the machinery that converts wind energy into electricity is plagued by limitations that are the realities of physics. No human design can improve wind turbines enough to capture more than a small amount of the energy in wind. The amount of energy is too small to give wind turbines a competitive edge over reliable conventional plants except in remote regions where conventional power sources are unavailable. Moreover, even though wind turbines work, sometimes the air is still.

On those steaming hot summer nights when the air does not move, the only relief is from air conditioning. When the sun is down and the wind speed is zero, the only place to get power for air conditioners is the nearest coal-fired plant.

Renewed Appetite’ for IPOs Set to Boost Solar and Wind Power

April 15 (Bloomberg) -- The biggest revival in stock prices since the Great Depression is reigniting interest in initial public offerings by environmental companies, spurring businesses from China to California to issue new shares.

Electric automaker Tesla Motors Inc., U.S. green energy producer Ameresco Inc. and Spain’s T-Solar Global SA have filed to go public, and more companies are set to follow.

“There’s renewed appetite for green IPOs,” says Luigi Ferraris, chief financial officer of Italian utility Enel SpA, which plans to sell a minority stake of its renewable energy unit Enel Green Power for $5.4 billion by the end of 2010.

The initial offering would be Europe’s largest since 2007, Bloomberg BusinessWeek reports in its April 26 issue. Green companies plan to raise $9.6 billion worldwide, more than triple the total value of IPOs for the industry in 2009, according to Bloomberg New Energy Finance.

IPOs have increased as the MSCI World Index of stocks in developed nations surged 80 percent since March 2009, recovering from a 42 percent slump in 2008 that was the biggest on record.

Renewable energy projects such as wind farms and solar parks are drawing the most interest, according to Alex Klein, research director at Cambridge, Massachusetts-based Emerging Energy Research. Energy conservation and water management are also gaining financial backers.

Share Offerings

Of the 19 green companies that have announced IPOs since September, 12 are from wind or solar businesses, according to New Energy Finance. None have sold their shares yet.

Nigel Meir of Ludgate Environmental Fund said two companies in his clean technology fund may seek to offer shares in the next 1 1/2 years. He wouldn’t name them.

“Investment bankers are out there soliciting business,” said Meir of the London-based fund. “The green sector has a lot of forward propulsion.”

His fund has stakes in 10 companies including agri.capital, a Germany developer of biomass plants; New Earth Solutions of Verwood, England, which turns waste into energy; and the Dutch wind turbine maker Emergya Wind Technologies BV.

Chinese wind turbine producer Xinjiang Goldwind Science & Technology Co. is aiming to raise $1.5 billion in Hong Kong. The company already has a listing in Shenzhen.

British solar energy producer Engyco wants to secure $1.4 billion, while its Madrid-based rival Renovalia Energy SA may raise more than $300 million.

Tapping Markets

San Diego-based Fallbrook Technologies Inc., a maker of efficient transmissions for vehicles, is seeking $50 million. Tesla of Palo Alto, California, plans to raise $100 million.

After more than a year of “weak” equity markets, “now there appears to be a window of opportunity,” Robert Mansley, head of Credit Suisse Group AG’s European renewable energy investment banking unit, said in an interview. The industry “requires substantial amounts of capital.”

Environmental companies have one advantage over many non- green rivals: state support. Countries around the world have earmarked $184 billion to fund renewable energy installations and projects such as modernizing the electricity network, New Energy Finance estimates.

The U.S., Japan and European countries are tightening regulations to force companies to improve energy efficiency and cut carbon-dioxide emissions.

Government Funds

“A big part of the renewables market is the stimulus provided by governments,” said Chris Thiele, head of European utilities investment banking at Morgan Stanley in London.

State funding may ease as governments, particularly in cash-strapped European countries, work to curb growing deficits and subsides that were too generous.

Germany and Spain have cut support for solar power after together capturing about 75 percent of worldwide installations for photovoltaic panels in 2008. Czech Prime Minster Jan Fischer told the E15 newspaper in an interview published on March 8 he’d reduce rates paid to clean power producers.

U.K. Prime Minister Gordon Brown and the Conservative opposition both plan to reduce the deficit, which at more than 12 percent of gross domestic product is the most in the Group of Seven nations.

Green initiatives such as loans for homeowners who install solar panels may be trimmed by politicians under pressure to curb deficits, said Walter Nasdeo of Ardour Capital, a New York bank specializing in clean technology.

Subsidies “are at the whim of whichever party is sitting in power,” he said.

Solar Stocks

Solar stocks have also underperformed the broader equity markets in the past year. The Bloomberg Global Leaders Solar Index, a measure of 38 companies that generate more than half of the solar industry’s revenue, has gained 6.5 percent in the past 12 months, lagging behind the 44 percent rallies for the MSCI World Index and the Standard & Poor’s 500 Index.

Three Chinese solar-related companies, JinkoSolar Holding Co., Daqo New Energy Corp. and Trony Solar Holdings Co., have shelved U.S. IPOs since December, Bloomberg data show.

That hasn’t stopped Enel Green Power. The electricity generator has secured $61 million in U.S. stimulus money for two geothermal power plants in Nevada. It aims to land more federal support for American wind, solar, and geothermal projects.

“The U.S. offers a huge opportunity for growth,” said Ferraris, Enel’s finance director.

‘Once Backed Hope’

In its home market, the Rome-based utility benefits from rules that let it charge customers above-market prices for clean energy.

Enel Green Power plans to invest $6.9 billion in renewables by 2014. All of the IPO money will help pay down its parent company’s $69 billion in debt.

Before the financial crisis, even companies with few customers and unproven equipment could get funding. Steady sales from proven technology are a must, something virtually all the companies looking to list now have, said Stephen Mahon, chief investment officer at Low Carbon Investors.

“People once backed hope,” Mahon said in London. “Now they back revenues.”

Electric Edsel

Have any big successful products emerged from government programs? None that I can think of. It's not likely Steve Jobs and Steve Wosniak at Apple received help from taxpayers to build their first computers. More colorfully and geeky entrepreneur-like -- according to the Apple myth -- Wosniak had been making money building and selling little devices that fooled telephone company computers into giving him -- and his customers -- long-distance phone calls for free.

Microsoft? Federal funding? No. Then there's the Internet. The Net did get its start in a government setting. But its transition to public use was completed without a dime of taxpayers' money. Frankly, the Net is an example of the government's inability to see the commercial value of something it controls. When it comes to spotting opportunity, the governments suffers from a severe blindspot.

The following NY Times article is interesting and disturbing. When you read Electric-Car articles, you get a feeling that everything about an electric car has sprung from a new technology freshly innovated for the electric vehicle. There's a sense that electric-car companies are truly re-inventing the wheel.

In fact, there's only one aspect to these vehicles that is tied to technical advancements -- the battery. Everything else is, as they say, "off the shelf."

Unfortunately, the reporter claims the car will travel 300 miles on a single battery charge and the batteries can be recharged in 45 minutes. Both claims seem totally bogus.

Currently there's no battery system that will move an electric vehicle that far without recharging. The claim is probably based on theoretical projections including motion at slow speed over flat terrain with the stereo, windshield wipers, headlights, air conditioner or heater and interior lights OFF.

Tesla's claim of recharging the batteries in 45 minutes also needs a lot of explanation. If the batteries can receive a charge at that rate -- that's like drinking water from a fire hose -- then the recharger is unsuitable for use at home.

The reporter ignores their revolutionary nature and rolls right along, mentioning that the car factory has not been built yet. No mention of whether members of the United Auto Workers union will staff the assembly line. Probably not.

Tesla designers also take a cavalier attitude toward kids when assigning their seating in this sedan. They ride in the trunk.

Meanwhile, the most obvious conclusion derived from this article concerns the fact that the Venture Capital firms that had been backing Tesla want out. They want to recover their investment by tapping taxpayers. They have completed their analysis and they know these electric cars -- at $50,000 -- are the new Edsels.


March 27, 2009

An All-Electric Sedan, Awaiting Federal Aid

LOS ANGELES — Tesla Motors on Thursday unveiled its Model S, an all-electric sedan it hails as the beginning of a generation of fossil-fuel-free cars and a profitable company.

But before that happens, the company must find the money to build the vehicle. Tesla is pinning its hopes on Washington and a $450 million government loan. The company expects to hear from the Energy Department this year.

“We are highly confident that Tesla will be selected, and it will occur this year,” said Elon Musk, the company’s chief executive, after displaying the car to customers, analysts and reporters in a gigantic hangar set up to look like a lounge at SpaceX, Mr. Musk’s rocket factory. His other venture is to build a spacecraft.

Tesla, which was founded in 2003, was heralded as Silicon Valley’s solution to the nation’s energy problem. If a struggling Detroit could not make an electric vehicle, then a Silicon Valley start-up would.

Today, Tesla is facing the same plight as many green-energy start-ups. These huge, capital-intensive projects have been paralyzed by the credit crisis, and their survival depends on federal loans that have only just started to flow.

“Silicon Valley has mocked the government for decades and is now completely dependent on it,” said Michael Kanellos, a senior analyst at Greentech Media. “They can’t get a project off the ground without these loans.”

The Model S is Tesla’s second car. Its first is the $109,000 Roadster sports car. An elite group of 300 own the car and the waiting list is 1,000 names long.

The Model S, which Tesla says would be the first mass-manufactured all-electric car, will cost $57,400, or $49,900 after tax credits. Mr. Musk said that, when gas savings are taken into account, buying a Model S will be comparable to buying a $35,000 Ford sedan. “Would you rather have this car or a Ford Taurus?” he asked, pointing to the sporty silver prototype.

The car will travel 300 miles on one battery charge, he said, and the battery can be recharged in 45 minutes. The car is big enough to carry five adults and fit two children in rear-facing seats in the trunk. There is a touch screen in the console connected to the Internet and storage under the hood.

The Model S is supposed to be ready in mid-2011, but that will depend on securing the government loan and finding a site for the auto plant. Mr. Musk said Thursday that Tesla was close to signing a deal to build a plant in Southern California.

Tesla has spent $50 million developing the Model S and needs $250 million to $300 million more, he said. Once Tesla finds a site and gets the money, it will take 24 to 30 months to begin production, he said.

Tesla has raised $186 million from investors, $55 million of it from Mr. Musk, who made his fortune when PayPal, which he helped found, was sold to eBay. Other investors include Google’s billionaire co-founders, Larry Page and Sergey Brin, and Draper Fisher Jurvetson, the venture capital firm.

Mr. Musk has said that he underestimated the money, time and effort needed to build a car company.

Tesla hopes to receive one of two government loans it is seeking. One, a $250 million loan, would come from money Congress authorized in 2005 for clean energy projects. The first loan guarantee under the program was made to solar company Solyndra last week.

The second loan Tesla is seeking, $450 million, would come from $25 billion Congress authorized in 2007 for electric vehicle technologies.

The Energy Department has not granted any loans under that program and has been criticized for moving slowly. But the energy secretary, Steven Chu, has said he plans to distribute some of the money in coming weeks.

Tesla is also financing the development of the Model S with deposits from people on the waiting list, who can pay $40,000 to reserve one of the first 2,000 cars or $5,000 for later cars.
For those who are worried about what will happen to their deposits if the car is never produced, since the money will be spent on development and not held in escrow, Mr. Musk said: “The worst-case scenario is they would lose their money. They are at risk.”

Still, he said: “This car will be manufactured, it will come to market. You should have zero doubt about that.”