NEW ENERGY LIFELINE DANGLES

Clean-Tech Developers Fret Over Witching Hour for DOE Grants
Nathaniel Gronewold, March 28, 2011 (NY Times)

"…[F]inancing for wind, solar and other clean energy projects is still hard to come by, experts say…Deals are getting done, but not at the rate that the industry would call robust…many project developers are still dependent on temporary government support measures…[and they are worried about] the pending end to a Department of Energy program that allows projects to claim cash grants in lieu of the tax credits that have been the mainstay of renewable-energy project financing for years…

"…Insiders assume the production tax credits and investment tax credits will return next year, but most also agree the grants will end this Dec. 31…Projects are still being built, and [there is optimism] about the potential for distributed solar energy programs and wind projects financed partially by community organizations…[but] cash grants have so far been the lifeblood of many renewable energy projects…[It is not clear that] banks have an appetite for continuing their support into next year…[with] tax equity financing structures, which allow them to claim tax credits to offset liabilities from more profitable business streams."

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"…[Beyond the cash grant, most New Energy companies want] stronger, more consistent government support beyond the temporary tax incentives that are sometimes extended just days before they are set to expire…[A] national feed-in tariff [could] do wonders for domestic clean energy manufacturing and distribution…[and the] clean-tech industry has long called for a price on the carbon dioxide emitted from fossil fuel combustion, but [those are politically unlikely]…

"…[D]evelopers may not have to worry too much if some of the larger, more committed financiers maintain their stated support…GE Energy Financial Services, one of the largest players in the field…met its goal of achieving $6 billion…[in] renewable energy investments at the end of 2010. But that spending was spread across 14 countries, and 75 percent of domestic spending was focused on states with renewable portfolio standards or laws that mandate a certain percentage of electricity be sourced from renewable sources…[JP Morgan Chase’s] investments in alternative energy projects in the United States totaled $3.2 billion last year. The money went to four geothermal power projects, 67 wind farms and 12 photovoltaic solar power projects…All those arrangements were tax equity structures…[and it says it will] likely continue its support so long as Congress keeps tax credits and other incentives in place…"

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"Globally, 2010 was a record year for alternative energy investment with growth fueled almost entirely by government economic stimulus spending, especially in China…Some believe that with the return of $100-a-barrel oil prices, this year should see bank spending on renewable energy beating 2010 figures, even as direct government subsidization slips away…[M]ainstreaming of alternative energy finance led by likes of JP Morgan Chase and others should also see other players coming into the field…

"But the industry will still face some significant head winds…[E]ven in 2010 many developers…struggled to raise cash during the construction period, which did not enjoy any direct stimulus spending. And the time and resources required to manage a tax equity structure meant that projects had to be large enough to justify those extra costs, leaving out many otherwise worthy projects…And banks still favor wind and solar over other innovative alternative energy systems…[Many] would like to see the cash grant program extended or at least be replaced by something more robust than just a return to base tax credit support, like a federal feed-in tariff…"