Thin-film PV is the game changer, right? By nearly all relevant metrics – cost, performance, and operational behavior – it does just as well as, and sometimes better than, traditional crystalline silicon PV. It's cheaper and simpler to produce, attains higher output in both low light and high temperature conditions, and – for some technologies – boasts conversion efficiencies to rival some multicrystalline modules. Over the past few years, thin-film PV has shown it can play in almost all markets – from residential rooftops in Marin County to utility-scale projects in Bavaria to subway stations in Brooklyn. GTM Research even forecasted that thin film would comprise roughly 50 percent of the incremental demand market in 2012.

But something is happening in Europe today that could put a damper on thin film's meteoric rise: banks and project lenders are refusing to finance projects using thin-film modules. At a conference I recently attended and spoke at in London, I heard from a number of Spanish, Italian, French and German bankers who are routinely passing on thin-film projects. "Why go to thin film when we have plenty of polysilicon applications and we're making a killing?" one asked, rhetorically. "Our [technical due diligence] engineers have very exacting standards," said another. "The banking market is shut for new technologies," said a third – openly taunting the handful of thin-film execs in the room.

The credit crisis is driving bankers' hesitancy to finance thin-film projects. Capital today is both scarce and expensive, forcing bankers to pass on projects they might have financed only nine months ago. Today only low risk, "gold plated" projects are receiving financing. These are projects with quality sponsors, experienced developers and EPC firms that use "bankable" technology. In other words, the projects that receive capital are those with the lowest risk profile. Technology components comprise roughly 85 percent of a project's cost, and the module comprises roughly 50 percent of that cost center, which means that the module represents the largest cost risk component of a PV project.

One of the biggest issues in technology selection is durability, and the biggest aspect of durability is performance degradation. As Spire CEO Roger Little so ably instructed me in front of 200 people at a conference a few months back, thin-film modules have a tendency to degrade more and at a faster rate than c-Si modules. Whether this is true or not, it is certainly playing into the risk calculations of the European banks. At a higher level, operational experience with thin film is much lower than with c-Si, meaning there are more long-term questions that have yet to be answered by thin film in the field. By contrast, some c-Si projects built in the mid-1980s are still operating within their expected performance range.

Combining questions of risk with scarce, expensive capital means that – in the words of one Italian project developer – "banks are the technology choosers and they are continually exerting their desire to control the technology." In Europe this is resulting in banks passing on thin-film projects in favor of relatively less-risky c-Si projects.

That's not to say that all is lost for thin film. To the contrary, in the American PV market, thin-film projects are popping up like mushrooms after a spring rain. The U.S. downstream PV market is much more price sensitive than the European market where project revenues are set by feed-in tariffs in excess of $0.40/kWh. By contrast, commercial power purchase agreements in the U.S. might sell electricity for half that price, though they still need to reach internal rates of return found in Europe. Today those are in the range of 11 percent to 15 percent.

Developers are shaving capital costs to hit this mark and are routinely turning to thin-film modules from companies like First Solar to achieve upfront cost goals. That utilities and state and local governments are the U.S. market's two dominant counterparties today only improves the risk profile of commercial projects. The same is true for the dominant developers and EPCs in the U.S. market, many of whom have decades of operational experience in power generation, construction, and operations and maintenance.

There is another a possible explanation for European reticence. A rumor has made the rounds in the last few months that European banks are only financing European modules. This situation is most pronounced in Germany where many c-Si module manufacturers are struggling to support high cost structures in today's low price environment. Germany's powerhouse semi-state-owned banks, like LBBW and KfW-Ibex, may be giving preferential treatment to domestic modules in a bid of support. Or perhaps they're just suckers for quality German engineering. Either way, this means thin-film projects will continue to have a rough go of it in Europe for many months to come.