Stimulus Appears to Be Sparking Alt-Energy Revival

[one...two...tree 2,762]

But clean-tech still must clear the hurdle of a frozen credit market

By Nathanial Gronewold

NEW YORK—There are signs that the federal stimulus might be pumping a little life into the alternative-energy industry.

Financiers and law firms specializing in renewable energy say they see growing interest in reviving moribund projects and breaking ground on new deals. And while big banks that have braced the industry's backbone are still on the fence, some hedge funds and private equity and venture capital firms are cautiously looking to take advantage of stimulus provisions that temporarily eliminate the need for tax equity financing, which has long been a mainstay for renewable energy projects.

"Whether it's the stimulus package or the return of the banks, there is early evidence of a growing appetite for the types of small- to medium-size projects that they sponsor," said Tucker Twitmyer, managing partner at the venture capital firm EnerTech Capital.

The stock markets are still no place to raise cash, but if activity from many nontraditional sources of financing lifts the clean-tech sector faster, as many experts predict, that may encourage banks to ease their strict lending requirements and again lift renewable energy finance if credit markets start to normalize.

"I'd say it's a little bit like March in your garden," said John Gulliver, a specialist in renewable energy financing at the law firm Pierce Atwood. "There are some shoots of green coming up out of the frozen ground in the snow, but they're not ready to harvest yet."

There is some dispute among insiders as to which sectors are seeing the most benefits. Some are confident that solar energy companies are enjoying a big lift from the stimulus, while others observe signs that wind power is seeing more gains. Most assume that energy efficiency provisions in the law will see home and building weatherization fill up much of the activity, but analysts see opportunities for photovoltaic companies here, too.

But what is clear is that parts of the American Reinvestment and Recovery Act that replace the need for tax credits are giving the industry its biggest boost.

Prior to the financial crash felt in the second half of 2008, most alternative energy projects owed their life to federal investment tax credits and production tax credits that allowed banks backing projects to offset tax liabilities against their investments in wind farms and solar plants.

The structure worked as long as the banks pulled profits, but with most financial institutions expected to post steep losses for 2009, tax credit finance has become all but obsolete.

According to figures from the private equity firm Hudson Clean Energy Partners, about 25 of the largest financial firms were active in tax equity financing for alternatives in 2007, the year most analysts see as the historic height of the clean-tech market.

At least 16 of those firms left the field last year, including the permanent departures of Lehman Brothers, Wachovia, Merrill Lynch and American International Group (AIG). For 2009, Hudson Clean Energy counts six bank investors, although 12 could return if the tough financial climate stabilizes.

Congress getting credit

Signs of life in clean-tech are mostly due to Congress allowing companies to opt for Treasury grants in lieu of investment tax credits, experts say.

Biomass, geothermal, solar and wind power project developers can now elect to use the investment tax credit to get a federal rebate for the amount of the tax equity money that would have backed their projects.

The advantage, Hudson Clean Energy managing partner Neil Auerbach says, is that the new structure is much simpler and more affordable than the old periodic tax credit schemes favored by Congress in the past. The Treasury grants significantly lower the cost of financing, an important component given the high cost of capital in today's economy.

"Instead of accessing the currency traders in the financial institutional community that charge tremendous transaction costs to access their tax capacity, instead you go to the federal government, specifically the Department of Treasury, and you hand in your tax credit and you get 100 cents on the dollar supposedly within 60 days of a satisfactory application," Auerbach explained in a conference call hosted by the American Council on Renewable Energy (ACORE) on Wednesday.

Aside from the tax credit fix, new and better federal loan guarantees have considerably reduced the cost and risk of financing projects and are helping to lure jittery investors back into renewable energy.

Analysts expect that some of the $6 billion appropriated for loan guarantees will provide the foundation for at least $60 billion in new lending for clean energy projects over the next two years. The financial community is taking notice.

"I'm not saying they've jumped in, but we've gotten more phone calls, and there seems to be a greater degree of interest on the part of nontraditional equity investors, in which I would include things like hedge funds, private equity money, etc.," said Phillip Spector, an attorney specializing in energy and renewables at Troutman Sanders.

A possible stabilization of the fossil-fuel energy markets could also boost optimism and encourage even more firms to take advantage of the new government carrots.

Crude oil prices are now hovering around $50 a barrel. While the market may still see some price swings, many energy analysts theorize that oil prices have probably found a floor and will either stabilize at the $40 to $50 range or steadily rise over that mark in the coming months.

"There may be a perception that oil has bottomed out, and I think that will help if people get confident that they're not going to be competing in a $20 a barrel oil market but one that's $40 to $50 or $60," Gulliver said. "That changes the economics quite a bit."

Anticipating a renewable mandate

Clean-tech watchers are also crediting the stimulus for funding several previously authorized measures to lift renewable energy in the United States, in particular programs managed under the U.S. Department of Energy that have existed for years but never received funding when Republicans dominated Washington.

But most DoE projects have yet to take effect as stimulus money gets pumped into the economy in pulses. Analysts say it is too soon to tell what impact those appropriations will have on the now stirring alternative energy and clean technology industries.

Insiders also report that, while signs of fresh activity are promising, investors with the most money to spend on clean-tech are holding out for indications that forthcoming energy and transportation bills will provide more solid regulatory support for the industry.

While the stimulus is helping to prime the marketplace, there is much hope and anticipation that the federal government will establish a national renewable portfolio standard, or RPS, a mandate that the country generate a specific proportion of its energy needs from wind, solar, geothermal and other such sources. That, along with rules that place a price on a ton of carbon dioxide and other greenhouse gas emissions, will do far more to stimulate clean-tech than the law passed last month.

"Everybody is waiting for the next piece, which is the national RPS," said Peter Fusaro, founder of Global Change Associates and organizer of the upcoming Wall Street Green Trading Summit. "The market is going to track legislation. And we're going to get all that next month, hopefully."

Fusaro also expects the industry to get another big lift should Washington adopt a national utility earnings "decoupling" program along the lines of a successful California initiative. Decoupling eliminates the paradox whereby utilities that promote greater energy efficiency see profits fall as demand for their power decreases, establishing structures that guarantee that energy generators can retain their expected earnings.

Ultimately, banks are key

But experts say the renewable energy industry will only return to its heyday once the major banks final loosen up credit and reenter the fray.

While an important part of the picture, venture capital and private equity investors have nowhere near the amount of capital needed to fuel the industry on the scale that the new leadership in Washington is hoping.

For the Obama administration to meet its goal of doubling renewable energy generation by 2011, Hudson Clean Energy estimates that about $134 billion in new capital investments will be required by then. To reach a 10 percent penetration of renewables in the nation's energy mix by 2012, as President Obama has proposed, about $217 billion will be needed.

The most important remaining impediment to clean-tech investing "is the banks not lending," Fusaro said. "We need the capital markets moving again."

The large-scale wind and solar projects of the sort that moved along before the economic crash can get a lift from nontraditional sources of finance, but they almost all still need heavy debt financing to help see them to completion.

While the renewed interest in renewables is promising, the industry won't experience a real breath of life until the banks relax and open up their tight wallets again.

"It's too early to call it spring with the daffodils and tulips up," finance specialist Gulliver said, "but I think you can see signs of green poking up underneath the Earth, so that's good." Reprinted from Greenwire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500

http://www.sciam.com/article.cfm?id=stimulus-alternative-energy-revival

[Danno 1,228]

But clean-tech still must clear the hurdle of a frozen credit market

By Nathanial Gronewold

NEW YORK—There are signs that the federal stimulus might be pumping a little life into the alternative-energy industry.

Financiers and law firms specializing in renewable energy say they see growing interest in reviving moribund projects and breaking ground on new deals. And while big banks that have braced the industry's backbone are still on the fence, some hedge funds and private equity and venture capital firms are cautiously looking to take advantage of stimulus provisions that temporarily eliminate the need for tax equity financing, which has long been a mainstay for renewable energy projects.

"Whether it's the stimulus package or the return of the banks, there is early evidence of a growing appetite for the types of small- to medium-size projects that they sponsor," said Tucker Twitmyer, managing partner at the venture capital firm EnerTech Capital.

The stock markets are still no place to raise cash, but if activity from many nontraditional sources of financing lifts the clean-tech sector faster, as many experts predict, that may encourage banks to ease their strict lending requirements and again lift renewable energy finance if credit markets start to normalize.

"I'd say it's a little bit like March in your garden," said John Gulliver, a specialist in renewable energy financing at the law firm Pierce Atwood. "There are some shoots of green coming up out of the frozen ground in the snow, but they're not ready to harvest yet."

There is some dispute among insiders as to which sectors are seeing the most benefits. Some are confident that solar energy companies are enjoying a big lift from the stimulus, while others observe signs that wind power is seeing more gains. Most assume that energy efficiency provisions in the law will see home and building weatherization fill up much of the activity, but analysts see opportunities for photovoltaic companies here, too.

But what is clear is that parts of the American Reinvestment and Recovery Act that replace the need for tax credits are giving the industry its biggest boost.

Prior to the financial crash felt in the second half of 2008, most alternative energy projects owed their life to federal investment tax credits and production tax credits that allowed banks backing projects to offset tax liabilities against their investments in wind farms and solar plants.

The structure worked as long as the banks pulled profits, but with most financial institutions expected to post steep losses for 2009, tax credit finance has become all but obsolete.

According to figures from the private equity firm Hudson Clean Energy Partners, about 25 of the largest financial firms were active in tax equity financing for alternatives in 2007, the year most analysts see as the historic height of the clean-tech market.

At least 16 of those firms left the field last year, including the permanent departures of Lehman Brothers, Wachovia, Merrill Lynch and American International Group (AIG). For 2009, Hudson Clean Energy counts six bank investors, although 12 could return if the tough financial climate stabilizes.

Congress getting credit

Signs of life in clean-tech are mostly due to Congress allowing companies to opt for Treasury grants in lieu of investment tax credits, experts say.

Biomass, geothermal, solar and wind power project developers can now elect to use the investment tax credit to get a federal rebate for the amount of the tax equity money that would have backed their projects.

The advantage, Hudson Clean Energy managing partner Neil Auerbach says, is that the new structure is much simpler and more affordable than the old periodic tax credit schemes favored by Congress in the past. The Treasury grants significantly lower the cost of financing, an important component given the high cost of capital in today's economy.

"Instead of accessing the currency traders in the financial institutional community that charge tremendous transaction costs to access their tax capacity, instead you go to the federal government, specifically the Department of Treasury, and you hand in your tax credit and you get 100 cents on the dollar supposedly within 60 days of a satisfactory application," Auerbach explained in a conference call hosted by the American Council on Renewable Energy (ACORE) on Wednesday.

Aside from the tax credit fix, new and better federal loan guarantees have considerably reduced the cost and risk of financing projects and are helping to lure jittery investors back into renewable energy.

Analysts expect that some of the $6 billion appropriated for loan guarantees will provide the foundation for at least $60 billion in new lending for clean energy projects over the next two years. The financial community is taking notice.

"I'm not saying they've jumped in, but we've gotten more phone calls, and there seems to be a greater degree of interest on the part of nontraditional equity investors, in which I would include things like hedge funds, private equity money, etc.," said Phillip Spector, an attorney specializing in energy and renewables at Troutman Sanders.

A possible stabilization of the fossil-fuel energy markets could also boost optimism and encourage even more firms to take advantage of the new government carrots.

Crude oil prices are now hovering around $50 a barrel. While the market may still see some price swings, many energy analysts theorize that oil prices have probably found a floor and will either stabilize at the $40 to $50 range or steadily rise over that mark in the coming months.

"There may be a perception that oil has bottomed out, and I think that will help if people get confident that they're not going to be competing in a $20 a barrel oil market but one that's $40 to $50 or $60," Gulliver said. "That changes the economics quite a bit."

Anticipating a renewable mandate

Clean-tech watchers are also crediting the stimulus for funding several previously authorized measures to lift renewable energy in the United States, in particular programs managed under the U.S. Department of Energy that have existed for years but never received funding when Republicans dominated Washington.

But most DoE projects have yet to take effect as stimulus money gets pumped into the economy in pulses. Analysts say it is too soon to tell what impact those appropriations will have on the now stirring alternative energy and clean technology industries.

Insiders also report that, while signs of fresh activity are promising, investors with the most money to spend on clean-tech are holding out for indications that forthcoming energy and transportation bills will provide more solid regulatory support for the industry.

While the stimulus is helping to prime the marketplace, there is much hope and anticipation that the federal government will establish a national renewable portfolio standard, or RPS, a mandate that the country generate a specific proportion of its energy needs from wind, solar, geothermal and other such sources. That, along with rules that place a price on a ton of carbon dioxide and other greenhouse gas emissions, will do far more to stimulate clean-tech than the law passed last month.

"Everybody is waiting for the next piece, which is the national RPS," said Peter Fusaro, founder of Global Change Associates and organizer of the upcoming Wall Street Green Trading Summit. "The market is going to track legislation. And we're going to get all that next month, hopefully."

Fusaro also expects the industry to get another big lift should Washington adopt a national utility earnings "decoupling" program along the lines of a successful California initiative. Decoupling eliminates the paradox whereby utilities that promote greater energy efficiency see profits fall as demand for their power decreases, establishing structures that guarantee that energy generators can retain their expected earnings.

Ultimately, banks are key

But experts say the renewable energy industry will only return to its heyday once the major banks final loosen up credit and reenter the fray.

While an important part of the picture, venture capital and private equity investors have nowhere near the amount of capital needed to fuel the industry on the scale that the new leadership in Washington is hoping.

For the Obama administration to meet its goal of doubling renewable energy generation by 2011, Hudson Clean Energy estimates that about $134 billion in new capital investments will be required by then. To reach a 10 percent penetration of renewables in the nation's energy mix by 2012, as President Obama has proposed, about $217 billion will be needed.

The most important remaining impediment to clean-tech investing "is the banks not lending," Fusaro said. "We need the capital markets moving again."

The large-scale wind and solar projects of the sort that moved along before the economic crash can get a lift from nontraditional sources of finance, but they almost all still need heavy debt financing to help see them to completion.

While the renewed interest in renewables is promising, the industry won't experience a real breath of life until the banks relax and open up their tight wallets again.

"It's too early to call it spring with the daffodils and tulips up," finance specialist Gulliver said, "but I think you can see signs of green poking up underneath the Earth, so that's good." Reprinted from Greenwire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500

http://www.sciam.com/article.cfm?id=stimulus-alternative-energy-revival

Correction, These sources of energy will not flourish until other conventional energy is artificially

spiked in price via government regulation/ taxes.

You know and I know, left to open market forces, most of these alt. energy sources can not and will not compete with Oil, coal or Nat Gas.

[lostinblue 1,989]

A business nearby was interviewed by the local news paper. Energy was second biggest expense behind labor. What will the cost of goods sold line be after the price of energy hits the roof.

[Danno 1,228]

A business nearby was interviewed by the local news paper. Energy was second biggest expense behind labor. What will the cost of goods sold line be after the price of energy hits the roof.

As the cost energy will be artificially be jacked, of course people will be hurt by it but.... The ends will justify the means of forcing people into paying for higher cost energy, which might (or might not) have any effect on the Man-made Global warming theory.

[one...two...tree 2,762]

A business nearby was interviewed by the local news paper. Energy was second biggest expense behind labor. What will the cost of goods sold line be after the price of energy hits the roof.

As the cost energy will be artificially be jacked, of course people will be hurt by it but.... The ends will justify the means of forcing people into paying for higher cost energy, which might (or might not) have any effect on the Man-made Global warming theory.

Good grief. Do the two of you ever think of the accumulative cost of us driving cars? Ever wonder how much it costs for the traffic signals for just one intersection? Or the cost of the infrastructure for having a sewage system? Or electricity ...the millions of miles of underground cables? The reality is - these kinds of things have enormous costs. Nuclear power for example is enormously expensive, but so is extracting oil. I think you're both being incredibly naive or just plain ignorant that we have and continue to pour a lot of money into things that you both take for granted. So lets not single alternative energy out as if it is uniquely different in that sense. Photovoltaic and Wind Power are going to the be future. You can choose to bury your heads in the sand on it or look for opportunities in that future. Your choice.

[w¡n9Nµ7 §£@¥€r 123]

Photovoltaic and Wind Power are going to the be future.

[one...two...tree 2,762]

Photovoltaic and Wind Power are going to the be future.

It's not crystal ball sentiment, but grounded in sound facts. Mark my words.

[Pinocchio Liberal 268]

Good grief. Do the two of you ever think of the accumulative cost of us driving cars? Ever wonder how much it costs for the traffic signals for just one intersection? Or the cost of the infrastructure for having a sewage system? Or electricity ...the millions of miles of underground cables? The reality is - these kinds of things have enormous costs. Nuclear power for example is enormously expensive, but so is extracting oil. I think you're both being incredibly naive or just plain ignorant that we have and continue to pour a lot of money into things that you both take for granted. So lets not single alternative energy out as if it is uniquely different in that sense. Photovoltaic and Wind Power are going to the be future. You can choose to bury your heads in the sand on it or look for opportunities in that future. Your choice.

Have you ever thought of the wasted energy thats been used to keep yo dumb #### alive?

[spookyturtle 9,466]

Good grief. Do the two of you ever think of the accumulative cost of us driving cars? Ever wonder how much it costs for the traffic signals for just one intersection? Or the cost of the infrastructure for having a sewage system? Or electricity ...the millions of miles of underground cables? The reality is - these kinds of things have enormous costs. Nuclear power for example is enormously expensive, but so is extracting oil. I think you're both being incredibly naive or just plain ignorant that we have and continue to pour a lot of money into things that you both take for granted. So lets not single alternative energy out as if it is uniquely different in that sense. Photovoltaic and Wind Power are going to the be future. You can choose to bury your heads in the sand on it or look for opportunities in that future. Your choice.

Have you ever thought of the wasted energy thats been used to keep yo dumb #### alive?

Not nearly as much that has been spent on yours. Imagine all the money spent on putting you through school to have you turn out like this. What a shame.

[DEDixon 39]

I really don't get this alt-energy movement since there is plenty of oil in the world. It is like building a desalination plant on Hawaii's Big Island.

[Dr. A ♥ O 203]

^ oil is a limited resource but oil wells are plenty. There are thousands capped and pressurized and checked on annually through out the United States in rural agricultural farm areas. They have not been tapped yet.

Solar and wind are close to eternal and then there is renewable energy that is really being looked into. We have the technology to make light bulbs burn 100 years and so forth so why make products that don't last and are wasteful filling up land space. Land is also a limited resource and population growth is undermining. China knows this and had capped their population until recently with the recent earth quakes and devastation where families lost their one child.

Technology advances so rapidly we need to be a better conscious society of the impact we are having on the world. For the country that started the car we need to recognize all it's impacts on our environment and that there are better ways to live and do things we want to survive as a species on this planet. We have the minds to do it where as the other animals and plants don't have that choice. I am happy the green revolution is picking up and getting recognition and alternative energy is finally being realized as a long standing form of energy.

[NickD 203]

Solar energy is simply energy from the sun, wind is a form of solar energy, sun heats the earth, air rises creating a partial vacuum or better yet, a low pressure area, air moves, (wind) to fill that void. Photosynthesis is also a form of solar energy growing plants and trees that can be burnt to give a concentrated form of energy as is the decay of these plants to form coal or oil. Even a more inefficient method of using solar energy is to grow corn, boil and ferment it to make ethanol, photovoltaic also use the radiant energy of the sun, again solar, also a very inefficient means to use energy, can be block by clouds, only good during the peak daylight areas, and currently photovoltaic cells can consume more fossil fuel energy to manufacturer than the amount of energy that can produce over their lifetime.

Wind power is difficult to determine, but some say it's cost is competitive with burning coal, but not much on maintenance cost nor the cost of fossil fuels to manufacture them, our state is subsidizing the true cost of ethanol, so we are indirectly paying a lot more for it than oil. But oil also has hidden cost with the fact that by buying it, we are creating dictator type government we end up fighting, that should be figured into the cost. Also a lot of objection to installing wind generation as that would spoil the view and kill birds.

Emulating the nuclear fusion of the sun on the earth, seems to be the way to go, but research on this subject has been next to nil. We have an oil controlled congress and with politics involved in this energy question, really difficult to learn the actual cost. The departure of our FTC has led to many products that are far more energy inefficient with pure lies permitted by manufacturers. Our electric motors today are a bad joke compared to even 40 years ago, more like space heaters than motors.

While we have a known 4,000 year supply of natural gas and another at least 2,000 year supply of methane, EPA and other agency regulations are keeping the price high, can be for no other reason to keep import oil prices competitive.

Just saying with live in a country loaded with BS and if we had the laws today in the time of Thomas Edison and Henry Ford, we still would be riding horses and burning whale oil for lighting.

One thing for sure, our vehicles are an absolute disaster in terms of inefficiency as are many of our so-called energy efficient appliances.

[spookyturtle 9,466]

A business nearby was interviewed by the local news paper. Energy was second biggest expense behind labor. What will the cost of goods sold line be after the price of energy hits the roof.

As the cost energy will be artificially be jacked, of course people will be hurt by it but.... The ends will justify the means of forcing people into paying for higher cost energy, which might (or might not) have any effect on the Man-made Global warming theory.

If memory serves me correct, wasn't oil about $145 a barrel not too long ago and gas over $4 gallon? That had nothing to do with alternative energy sources. The cost of oil caused everything to rise, and most of it has stayed there. Prices haven't gone down at the supermarket. Sure. gas went down, but do you honestly think it is going to stay down? How much longer until it's $4 again? As soon as the world economy picks up, oil will fly thru the roof again. Now it will take OPEC a few months to ramp up production again to meet demand.

How long is going to take people to realize that alt. energy is the future, we've been thru an oil embargo, an oil shortage, and most recently an investor driven price gouge? Most people still haven't learned their lesson.

[Danno 1,228]

A business nearby was interviewed by the local news paper. Energy was second biggest expense behind labor. What will the cost of goods sold line be after the price of energy hits the roof.

As the cost energy will be artificially be jacked, of course people will be hurt by it but.... The ends will justify the means of forcing people into paying for higher cost energy, which might (or might not) have any effect on the Man-made Global warming theory.

If memory serves me correct, wasn't oil about $145 a barrel not too long ago and gas over $4 gallon? That had nothing to do with alternative energy sources. The cost of oil caused everything to rise, and most of it has stayed there. Prices haven't gone down at the supermarket. Sure. gas went down, but do you honestly think it is going to stay down? How much longer until it's $4 again? As soon as the world economy picks up, oil will fly thru the roof again. Now it will take OPEC a few months to ramp up production again to meet demand.

How long is going to take people to realize that alt. energy is the future, we've been thru an oil embargo, an oil shortage, and most recently an investor driven price gouge? Most people still haven't learned their lesson.

You are making my point very well.

If Obama were to raise taxes (directly or indirectly) on oil/ gas which boosted it's street cost to say 4 bucks a gallon, how much would it then be the next time we have a spike in prices? 6-7 dollars a gallon?

This is the exact plan..... make gas very high so people will have no choice bu to embrace a product or source of energy which costs 2 x what the open market is delivering now.

Sure the market can be crazy but getting govt involved is insane... WE WILL BE PAYING MORE THAN WE DID AT THE WORSE OIL SPIKE.

I would rather see some of these "green cities" convert their complete fleet of vehicals to electric (Police, EMT, service) then we can see how well this will workout before we plunge everyone into perhaps -not ready for prime time- technology.

[Hilarious Clinton 452]

Don't worry. The hypocrites in California will keep these unsightly monstrosities out of the state.