San Francisco, Calif. -- In a tough economic environment, renewable energy investors and executives hope governments will provide legislative and regulatory relief, even as they acknowledge political uncertainty and prepare for the worst.
“The outlook for power purchase agreements is not good,” said Michael Garland, CEO of Pattern Energy Group. “There is no motivation. There is no driver anymore. When places like California are [polling] at break-even on Prop 23, you are going to see a lot of utilities reluctant to do PPAs. Maybe the feds should just step up and contract for PPAs for the next year.”
Garland’s suggestion was but one of the many government initiatives championed at Renewable Energy Finance Forum-West. Others included extension of the Treasury’s 1603 cash grant program, the streamlining of approval processes for utility-scale renewable energy projects and more efficient administration of the Department of Energy’s 1703 loan guarantee program. (Editor's note -- remember how tech companies used to whine about government interference?)
“The 1603 cash grant extension is critical to keep the [renewable energy] industry going domestically,” said Pat Eilers, Managing Director at Madison Dearborn. “A grant extension to shore up the certainty in deficit of supply to monetize the tax credits is imperative.”
“[Solar] panel manufacturers, installers, [and] the entire value chain is fixated on how to reduce costs,” said Lyndon Rive, CEO of SolarCity. “If the investment tax credit [forsolar] doesn’t get extended, then in a supply constrained market, those with tax equity raise their cost. That single cost increase has a much bigger effect that any reduction in [value chain] costs.”
“We need governments and local entities that approve projects to act with a sense of urgency,” said Dennis Arriola, CFO of SunPower. “When it takes five to seven years to get a new transmission line through, investors get weary. We really need to have a streamlined approval process for larger utility-scale projects.”
“[We also need] a more efficient timeline for the 1703 program in terms of the efficiency of how that unfolds,” said Madison Dearborn’s Eilers. “We had a second close for a wind company with an innovative project in Oahu. [It] took 19 months. That was twice as fast as the other company that closed, Solyndra, but it was six times slower than what you can get done commercially.”
REFF-West speakers also dreamed big, even as they acknowledged that progress in Washington would be slow.
“It would have been nice to have a federal RPS, but when DC can’t lead, the states do a tremendous job of it,” said Arno Harris, CEO of Recurrent Energy, which Sharp recently purchased.
“I know this isn’t practical, but I would just assume wipe out all the tax credits and benefits and go toward a carbon tax or carbon trading,” said Pattern Energy’s Garland. “Until the [renewable energy] industry starts screaming at Washington as loud as the Tea Parties, we are not going to get simple, predictable policies.”
Because of political uncertainty, renewable executives are planning for both the best and the worst.
“Looking to 2011 and 2012, we try to plan for two scenarios, the rough scenario where demand in feed-in tariff markets falls off and the power market stalls for regulatory reasons, government reasons or commodity price reasons. The other is a more smooth scenario where we keep strong RPSs in place and utilities are highly motivated to engage,” said Recurrent’s Harris.