SolarCity will scale back a project to install 371 MW of solar panels on military housing across the U.S. after it failed to be approved for a $344 million loan guarantee from the U.S. Department of Energy before a Sept. 30 deadline.

The project, which had been valued at more than $1 billion, would have operated in 33 states on 124 military bases. The revised project will be in 11 states, according to news reports. The smaller project will allow SolarCity to continue with more private sector investments instead of government funding.

SolarCity executives reportedly sent letters to Congress asking for an extension to the deadline after DOE told the company it could not provide the loan guarantee on time because of increased documentation needed as a result of a congressional investigation. Congress is looking into the financial collapse of Solyndra, a solar manufacturer that received a $535 million loan guarantee in 2009 but declared bankruptcy in August.

DOE offered the conditional commitment to SolarCity on September 2. The loan guarantee would have covered 25 percent of project costs. SolarCity reportedly said it also has 20-year, fixed-price power purchase agreements with privatized military housing companies. In addition, Google (NYSE: GOOG) invested $280 million in SolarCity in June to pay for installations and maintenance costs in exchange for a portion of customer’s lease payments.

First Solar said on September 22 that it also could not meet the September 30 deadline for a $1.9 billion loan guarantee for the 550 MW Topaz solar power plant in California. The company has two other solar projects in California looking to close on loan guarantees.

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