Over 700 leaders in renewable energy convened in New York City June 29-30 to talk finance at the seventh annual REFF-Wall Street conference. Distinguished panel leaders discussed topics ranging from global and domestic market drivers to the state of renewable energy project financing. The major investment banks still active in the area weighed in, as did project developers in solar, wind, geothermal and biomass.
"Cautious optimism" was somewhat of a buzz phrase when it came to presenters' near-term outlooks, but the overall tone at the event tilted toward the positive end of the spectrum. There was a general sense of recognition that the renewable energy sector has weathered -- and adapted to -- the market volatility seen over the past two years.
- Discussions were focused primarily on solar and wind development, which remain the key focal points of project financing in the U.S. Delegates pushed market leaders for refined estimates as to when solar would reach grid parity (answer: largely deflected to the unpredictable nature of commodity prices) and contemplated the future of the U.S. wind market should the PTC not be extended past 2012 (answer: decidedly negative).
- Geothermal and biomass did manage to garner some of the spotlight. Geothermal power's baseload qualities were hailed by utilities able to use it to meet state RPS targets and by companies looking to develop the low-hanging geothermal fruit of the developing world, like Ambata Capital Partner's Michael Phillip. Biomass discussions were restricted primarily to biomass power generation, with the notable exception of ethanol producer POET, whose CEO Jeff Broin gave an update on the sector.
- Shale gas (natural gas produce from shale) was a major topic over the two-day event, with several delegates wondering what effect U.S. shale deposits were likely to have on future natural gas prices and the competitiveness of renewable energy projects. Several speakers from the investment banking community anticipate that shale gas could have a negative impact on PPA terms for renewable projects. American Electric Power CEO Michael Morris took this sentiment a step further, claiming that shale gas at $5.00 MMBtu (~3.5cents/kWh) represents a challenge for the U.S. renewable energy sector. This view was tempered by those like BrightSource CEO John Woolard, who considers natural gas (and hence shale) a lesser evil compared to coal and a means to ease the intermittency issues faced by solar and wind.
- Not surprisingly, the most oft-quoted hindrance to sector expansion was "regulatory uncertainty." Sentiment was mixed with regards to the U.S. Climate Bill, but several presenters exuded confidence that the section 1603 cash grant scheduled to expire at the end of 2010 would be extended. The cash grant has been vital to the build-out of U.S. renewable projects since the weakening of the tax equity appetite in 2008.
- There is a new threat to future PPA terms and availability besides low natural gas prices. According to Lisa Frantzis of Navigant Consulting, PPAs could be reclassified as debt on the balance sheet under FASB, lessening the appeal of PPAs to utilities.
- Google's famed Director of Climate Change, Dan Reicher, used the platform to promote the creation of a Clean Energy Deployment Administration (CEDA). The goal of CEDA is to help clean technology companies bridge the "Valley of Death" -- the funding gap that occurs once a development company has exhausted its VC funding but is not yet able to meet the strict risk/development requirements of debt and project financing providers.