“It was the best of times, it was the worst of times”
by Kristian Hanelt, VP Project Finance, Tioga Energy
Which do you want first? The good news or the bad news?
The good news is Congress extended the Investment Tax Credit for 8 years. This is both unprecedented and long overdue, and it’s got the body of the 2008 Solar Conference upbeat and jovial. People are a buzz about the support the industry has finally received from Congress – after 12 highly contested voting attempts to finally pass legislation this year and avoid a crippling lapse. Layer that on top of industry already high on rampant growth, and one might argue you run the risk of blindly marching a healthy solar market into distress over the greater financial elements at play.
So here is where the bad news comes in…the house of cards that is our financial and banking system is quivering and people in the exhibit hall or at events at Solar Power 2008 don’t seem to be fully aware of the extent of the damage currently happening in the credit markets.
Granted, clean energy investment seems to have found shelter during the initial stages of a credit fallout. But, there are some serious challenges for solar in 2009, depending just how extensive the current financial crisis shapes up to be.
Banks that have been traditional early adopters in financing renewable energy have either forced themselves to become regulated, or will not be paying taxes next year thanks to losses acquired in acquisitions or large write downs. The amount of taxable income in corporate America has shrunk. So investors sophisticated enough to work with solar providers could demand a premium for their investment.
That being said established companies with track records can and will weather the storm. Tioga Energy is fortunate enough to have carefully chosen partners that have maintained their tax equity support of our projects, as they have largely shielded themselves from write-downs. All of Tioga Energy’s 2008 projects are secure.
The financial crisis and its fallout will not only reshape the game of solar, it could also freeze out new US companies looking to get in and play. Hopefully the provisions of the $700 Billion bail-out will have the desired effects and quickly enough that naïveté and exuberance floating around the industry won’t run flat into the stark reality of the crisis as it is today. From what I’ve read recently, the bailout is having a mild effect to where bankers are seeing credit loosen a little and their consensus is it’s not a matter of if anymore, but when.
