Giving Credit

The question I am most often asked while giving presentations about falling module prices and disproportionately strong policy support in the United States is some variant of, "Yes, but if the banks are all seized up, how can any solar be deployed at all?" While seemingly urgent and important, the implicit view is heavily skewed by the current hip social meme that has emerged around the economic "collapse" and "depression" economics. It is far too influenced by the evening news and Hollywood stars dressing down at the Oscars to reflect the current scarcity (only diamond earrings, not the necklace too). Puh-leeze!

The fact is that all recessions are bad, and credit-led recessions are the worst of the lot. Think of the economy as a house (goods and labor markets) resting on a foundation (credit markets), and you can understand how much more time consuming and expensive relative repairs might be. (Fixing foundations always means you will have to do some house work later as well, while the converse is not true.)

Despite the seriousness of the situation, looking at the problems of GM and AIG is not the best method of looking at the prospects for First Solar or Sun Edison. In truth, these businesses are poised to weather the storm quite differently. First, the new stimulus package not only throws a ton of money at the renewable energy industries, it has provisions for jump starting projects through tax treatment, grants, and loans-even if credit markets continue to stay slow.

Second, lenders must lend to someone. According to our recently released report Anatomy of a Shakeout II, solar projects in California will benefit from increased subsidy and falling module prices, creating unlevered project returns in excess of 20 percent. Lenders (and equity investors) will find this very interesting indeed for multi-year, essentially fixed, returns.

Finally, some innovative programs have emerged to accelerate local participation, including the recent announcement that the Berkeley First municipal-backed program has issued its first funding. People will be difficult to dissuade from installing clean energy that makes them high returns on investment. Let's give credit where it is due. The sky is falling, indeed – it is raining money.