Renewable Energy Awaiting Clarity on Stimulus Financing

CreditSights has issued a pair of reports summarizing the 6^th Annual Renewable Energy Finance Forum in New York. The conference brought together skeptics, optimists, and pessimists, but all attendees were hopeful of an encouraging end result of the industry stimulus brought on by the American Recovery and Reinvestment Act (ARRA), according the reports. Topics discussed included financing at the debt and tax equity levels, the impact of renewable energy on the power markets and the prerequisites to bring more renewable energy to market.

A few general themes CreditSights took note of were:

• frustration with the Treasury’s slow response to act on rules for the 30% investment tax credit grant program,
• lack of risk appetite for projects without long-term PPAs in place, and
• scarcity of players involved with the tax equity markets.

Without investor certainty, capital will wait on the sidelines, for the most part.

In part one, CreditSights explores the government’s role and the role of financial players in this re-emerging sector. Part two covers renewable energy providers, new sector innovations and the participation from utilities.

Jeffrey Holzschuh of Morgan Stanley gave the institutional investor’s view of renewable energy investing. After a period of optimism and investment from 2005-2007 in the space, we are now in a period of rationalization and optimization, according to Holzschuh. After this period, he expects there to be a long monetization period, when he expects photovoltaic solar will reach grid parity and large scale solar thermal plants to start ramping up. He also foresees a shift in focus to transmission and distribution from generation.

Comments

[Mad Hedge F...:]

The future is in solar. I have been covering the solar industry for nearly 40 years now, and for most of this time it has only been economic in space stations. But times are changing. If you look carefully at your electric bill and calculate the cost per kilowatt hours each month as I do, you will notice that the price has been going up for the last ten years. This is partly because of ineptly handled deregulation, but also because our utility, Pacific Gas & Electric (PCG) is mandated by state law to reduce greenhouse gas emissions. Last year, the collapse of the economy and crude prices drove the cost of thin film solar’s primary raw material, polysilicon, down dramatically. The cost curve is falling, the demand curve is rising, and it is only a matter of time before they cross. The gap now is only a few cents per kilowatt, and that can easily be bridged with government subsidies. This industry is on the verge of becoming truly profitable. All it might take is another rise in crude prices, something you can count on. Watch behemoth First solar (FSLR) position itself to cash in, as well as Suntech Power (STP) and SunPower (SPWR. But also watch the volatility, as this is definitely an “E” ticket ride.

Jul 01 11:30 AM

[bartpr:]

wiat for the results of some form of carbon tax to come out of the gov.
this will trigger alternative energy buildout to avoid the tax. it will be like an indirect subsidy for solar and wind. this will take time too because the grid to support the energy farms must be built too.

Jul 02 09:31 AM

[jerrydd:]

The best investment is in RE equipment itself used to generate profits from selling it's output.

Solar thermal is a great Idea but even better for homes, small businesses that can use the heat too. Plus they can be fired by any fuel from wood pellets to NG if more output is needed. A company that exploits this should be a big winner.

Jul 02 12:45 PM

[harammph:]

Another 40 years of covering the Solar Industry. Another unchanging comment.

Jul 04 04:22 AM