In the State of the Union President Obama renewed his commitment to the widespread adoption of renewable power as a critical piece of America’s energy and economic future. In last year’s speech he included a proposal to have 80 percent of US electricity come from renewables by 2035.
Even making incremental steps towards these goals requires better access to financing for these renewable energy projects. Energy projects, and particularly renewable energy projects, require a lot of money to build.
There appear to be 3 key challenges for a renewable energy company to access capital in today’s market.
(1) Low natural gas prices (which influence, and in some markets control, electricity prices) have shifted the economic equation by depressing near-term power prices in some markets and creating the perception of flat or lower electricity prices in others.
(2) The continued lack of liquidity in global financial markets remains a very serious problem. Access to capital for any business remains a challenge, but is more acute where the investment requires an investor or lender to commit capital for a longer term in order to realize returns.
(3) An absolute failure by the Federal government to provide a stable set of supporting policy programs—illustrated by the 2011 sunset of the 1603 Treasury Grant program, the near certain end of loan guarantee programs (due in no small part to the political/media storm over Solyndra’s insolvency), and the current expiration of tax credits set for wind in 2012 with biomass, geothermal and a host of other technologies set to expire at the end of 2013, and there are resources as credit card consolidation which help people consolidate their debts.
Is there anything meaningful that can be done to open renewable energy financing channels short of waiting for one of the 3 fundamental challenges outlined above to change (rising natural gas (and electricity) prices, a marked increase in available and active investment capital, or the development of a cogent federal energy policy)? If not, to which of these 3 challenges should the renewable energy community look for hope?