Energy Financing Is Gone with the Wind

By Ucilia Wang

Financing for wind farms has disappeared and fewer companies will be able to develop the kind of "mega projects" needed to feed the growing demand for energy, said Reyad Fezzani, CEO of BP's (BP) wind and solar operations, at the Dow Jones Alternative Energy Innovations conference Wednesday.

In just the last month, money that typically would be available for building renewable-energy projects has "completely dried up," thanks to the financial market crisis, Fezzani said during a keynote and on-stage interview with Yuliya Chernova, editor of Dow Jones' Clean Technology Insight.

To weather the downturn, BP and other companies will have to fund those wind farms and solar-power plants using equity finance. They can then refinance when the credit crunch eases, Fezzani said.

"This is a serious issue for those who don't have equity on the balance sheet to continue to operate," he said. "You probably will see behind the scene, frantic activities to bridge the gap."

Fezzani's remarks reaffirmed what many solar, wind and biofuel industry executives have expressed since the fall of a series of U.S. investment banks and mortgage lenders (see Lehman's Fall to Create Greentech Woes and VCs to Solar Startups: A Deal You Can't Refuse).

His comments also came the same day that Carpinteria, Calif.-based Clipper Windpower (CRPWF.PK) said it had completed a joint-venture agreement with BP Wind Energy to develop a 5,050-megawatt wind farm in South Dakota.

Fezzani said the South Dakota project represents the "next frontier" for wind-farm development, and one in which only a small group of companies can participate. Iberdrola, the Spanish wind energy giant, is another player (see Iberdrola to Spend $1B on Renewable Energy).

Despite the difficult times ahead, Fezzani said Americans' demand for electricity shows no signs of lagging, making wind and solar projects good bets in the long run. Fezzani also sees a trend in which wind-turbine makers will devote less money and energy on building wind farms to create a market for their products.

"You will find that the days of wind turbine manufacturers bidding into projects are behind us," Fezzani said. "We need them to invest in R&D to prove the efficiency of their products."

Chernova asked Fezzani about his company's plan to nix a solar factory expansion plan in Maryland, and Fezzani largely evaded the question with statements about how bullish he feels about the solar market in the United States.

"When it comes to deciding where we focus on investments, we do it like everybody else," Fezzani said. "It's economically driven."

BP Solar recently halted a $97 million plan to build a silicon-ingot factory at its headquarters in Maryland, citing intense competition from low-cost producers in Asia (see BP Solar Nixes Factory Expansion).

Comments

[epeon:]

This is, of course, completely expected. These alternative energy projects are marginally economical. They really only make sense with big tax subsidies and even then, just barely. With the cost of conventional fuels dropping, politicians are loosing interest. So, just like oil shale in the 70s and ethanol in the 90s, these trending types of power will slowly perish.

2008 Oct 23 08:20 AM

[anarchist:]

Does anyone remember "global warming"? Guess not!!!!!!!

2008 Oct 23 09:56 AM

[absherman:]

Marginally economical? Surely your perception of those ROI figures your looking at are skewed by your oil goggles. The only reason fossil fuels are profitable is because the more we use, the less there are of them because THEY AREN'T RENEWABLE. (supply vs demand). Initial capital for wind is daunting, but ROI is HUGE. Especially when calculating todays market price of kwh sold to consumers and those profits reinvested now figured against future cost with tomorows dollars. If that's a bit sketchy, try this one. Once the Machine is catching the wind, your only cost is preventive maintenence and upgrades, all of which are costs EVERY energy generating system inherently incurs. However, unlike EVERY other conventional energy system you dont have to pipe, ship, or rail fuel which you had to mine or drill and then refine to produce and none of that infastructure nor any of its associated startup or maintence costs are required. And among Renewables, WIND is THE WAY. It is accessible globally. Ethanol or Biomass fuels have to be harvested and converted. Water ebbs and flows, and only covers 3/4 of our world. Solar requires the sun to shine which happens only half the time. As long as the earth rotates on its axis and orbits the sun, THE WIND BLOWS. EVERYDAY. EVERYNIGHT. EVERYSEASON. EVERYWHERE. ALLTHETIME. And if the wind isnt strong enough to flap the flag on your pole, chances are it is flapping your neighbors flag down the street, or the guy's across town. And if all these are attached to the grid, then the grid is continually supplied somewhere for everyone.

2008 Oct 23 01:26 PM

[JGB:]

Epeon,

How are you explain your thinking to your children ?

2008 Oct 23 07:54 PM

[absherman:]

come again?

2008 Oct 29 02:37 PM