Nearly 30 banks including BNP Paribas SA and Rabobank Nederland NV are being lured back into financing “sexy” U.S. alternative energy projects following an $80 billion government investment in the industry, a project manager said.
Debt financing may return to the 2008 level of about $6 billion in 2010, after falling to $3.2 billion last year, as banks lend more to wind and solar energy projects in the U.S., said Bruno Mejean, a managing director in New York at Norddeutsche Landesbank Girozentrale AG, a state-owned German lender.
“Most banks shut down in the first half of last year,” Mejean told attendees at a renewable energy conference in Washington. “This year they realize that they have to make money after all, so they are opening the spigots and deploying capital primarily to this sexy space.”
President Barack Obama last year offered incentives to help companies finance projects that produce energy from cleaner sources as part of his effort to revitalize the economy. With some of the government aid set to expire at the end of this year, project developers say more taxpayer subsidies are needed to keep pace with investments in Europe and China.
“The market’s better,” Jeff Holzschuh, chairman of Morgan Stanley’s Environmental Committee, said today. “It has thawed somewhat, but it is nowhere near up to the challenge of trying to finance the kind of project expenditures that we’re talking about.”
Obama last year pushed through a $787 billion economic stimulus package that included about $80 billion for energy programs. Renewable energy incentives include $2.3 billion in tax credits for solar panels and wind turbine manufacturers and a grant program for renewable projects that has so far paid out about $2.3 billion.
“The federal government has a very important and frankly a growing role in making sure that we succeed in the clean energy economy and that we are far more competitive than we are today with China, the EU and other parts of the world,” Dan Reicher, director of energy and climate initiatives for Google Inc., said in an interview. “It starts with simply extending what we’ve already put on the books.”
The subsidies helped FPL Group Inc. and BP Plc lead a record 9,900 megawatts of wind-power installations last year, according to the Washington-based American Wind Energy Association. U.S. developers may double solar panel installations this year to cover 1,000 megawatts of energy from about 500 megawatts in 2009, said Roger Efird, president of Suntech Power Holdings Co.’s U.S. development unit.
Shot in the Arm
“Last year saw the biggest one-time shot in the arm ever for green energy, but the country’s now facing a looming fiscal crisis over deficits,” said Doug Faulkner, president of Chrysalis Energy Partners, a Washington-based energy consultant. “Green programs that we all know and love ultimately are not going to be immune.”
Bank lending rates remain higher than many developers can get with federal loan guarantees, and government support is still needed to make some projects profitable, said Jim Barry of Dublin-based NTR Plc, a developer of concentrated solar power plants.
“We were seeing rates as high as 15 percent or more, but now it’s more like the high single digits,” Barry said at the conference. “We need to finance for longer periods and at lower rates.”
European banks are more likely to finance U.S. renewable projects, said Michael Ware, a managing director in Washington of Good Energies, which has invested more than $1.5 billion in renewable energy. U.S. banks remain “cautious” and focused more on technologies that have already been deployed in the U.S., he said.
“We need more equity players in the solar and wind downstream markets,” Ware said. “We’d like to see pension funds, insurance companies, institutional investors realize that renewable energy projects are reliable long-term investments.”
Obama has proposed an additional $5 billion in tax credits for companies that make solar panels and wind turbines in the U.S. An outline of a Senate jobs bill released yesterday didn’t include an extension of the credit, Whitney Stanco, an analyst in Washington for the research firm Concept Capital, said today in a research note.
The administration hasn’t taken a position on whether a tax grant program for renewable projects should be included in the jobs bill, said Sanjay Wagle, renewable energy adviser to U.S. Energy Secretary Steven Chu. Extending the grant program is one of the industry’s top priorities, Wagle said.
Effect on Jobs
“The purpose of it is jobs in 2010,” Wagle said in an interview yesterday. “So what the industry needs to do is to articulate clearly the impact on jobs in 2010.”
A two-year extension to the renewable energy tax grants was introduced in the House yesterday. Passage may be delayed until the fourth quarter, so that developers seeking to benefit from the incentives hire workers to complete projects this year, said Todd Coles, a partner at Troutman Sanders LLP in Washington.
“If the extension is put in place now, the immediate effect on jobs would be diminished,” Coles said on a panel today. “But at some point you’ll have projects stop moving forward without an extension.”