There are growing signs of rust on the once gleaming green energy machine, and the corrosion is threatening the wind and solar power industries.
Despite the uncertain and often illiquid economy, the overall forecast for sustainable industry financing is reasonably good; but the gears appear to be grinding to a halt when it comes to wind and solar because traditional methods of power project financing are threatened by the skittish capital markets.
Certainly, the broad credit market environment has negatively impacted project financing for solar and wind power projects and made it hard to raise debt funding; however, more specifically, critical tax equity take-out financing has dried up as traditional buyers of tax credits in the solar and wind market have all but disappeared with no sign of returning soon. This combination of events has caused venture capitalists and other early-stage investors to pull back from technologies serving the renewable power industry, because, in large measure, they believe it will be extremely difficult to commercialize solar and wind technologies if there's no funding from tax equity investors.
Painful Metrics
The metrics show the pain currently being experienced by solar and wind power companies. Installations are down anywhere from 30 percent to 50 percent; prices of wind turbines and solar panels have dropped by at least 25 percent over the past six months; and equity valuations have declined, in some cases, by 50 percent or more from where they were 12 or 18 months ago.
New entrants like Microsoft and other large corporations are beginning to explore the solar and wind tax credit space, but no one is moving forward in a meaningful way, and no one is moving fast enough to fulfill current market demands. And, since appetite from investment banks, commercial banks and insurance companies for tax credit financings related to wind, solar and other renewable projects has dwindled in terms of participants from the high teens to the low single digits, it may not matter; supply of tax equity interest simply cannot keep up with demand under the current conditions.
Stability From the Public Sector
We believe that stabilizing the wind and solar industries in the United States is a job for the public sector right now, and that government must play a commanding leadership role in helping the private sector realize its true commercial potential.
Companies in these industries are crucial from an environmental point of view; but they are even more critical from an economic perspective.
In 2007 and 2008, more than 50 wind energy-manufacturing facilities were opened, expanded or announced in the United States, adding 14,000 new jobs. More than half of those jobs came on stream in 2008, as the U.S. economy was faltering.
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