Will the Credit Crunch Deal a Body Blow to Renewable Energy Projects?
Signs are starting to mount that the credit crunch will delay or derail large renewable energy projects, since most of them rely on both construction and long-term debt financing, as well as funding to tie up large areas of land for a protracted permit period.
A December 5th story in the Phoenix Business Journal describes that plans are on hold for the 280 megawatt $1 billion Solana Generating Station, Arizona’s largest solar plant, as funding dries up for large scale utility generating plants of all fuel types. In addition to the difficulty of getting bank loans, equity funding has dried up as a lot of large Wall Street investment banks such as Lehman Brothers either went our of business or were absorbed by other entities, as Merrill Lynch was purchased by Bank of America. Ironically, this situation may force utilities to move from their current arms-length stance of just acting as power purchasers to becoming the owners and developers of such facilities, since state utility commissions are holding firm on their renewable portfolio standards requiring a certain amount of renewable power online by fixed dates. Even if the lending environment eases next year, credit is likely to be more expensive and with more stringent terms and conditions attached. There is also the problem with wind power generating stations that the current energy production tax credit expires at the end of 2009, so that without further Congressional authorization most projects are likely to be smaller than otherwise anticipated.
Posted by (JavaScript must be enabled to view this email address) on 12/10/2008 at 12:59 PM
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