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Posts from the ‘Finance’ Category

Apr 28

US Grid Has $107B in Investment “Gaps” by 2020

The American Society of Civil Engineers finds that failing to spend on grid upgrades will end up costing U.S. homes and businesses nearly $200 billion by 2020.

Here’s another grim reminder that doing nothing to fix the United States’ power grid will be a lot more expensive in the long run than spending hundreds of billions of dollars to bring it up to 21st-century technological standards.

The American Society of Civil Engineers just released its latest “Failure to Act” report on the country’s deteriorating infrastructure, this one focused on the power delivery system. In simple terms, ASCE’s report finds a gap of $107 billion dollars between today’s trends on grid investment and what the country needs to invest between now and 2020.

If U.S. utilities and regulators don’t work to increase spending trends to make up that gap, the result will be a “combination of aging equipment and capacity bottlenecks that lead to the same general outcome — a greater incidence of electricity interruptions,” the report finds. Those may come as equipment failures, voltage surges and power quality irregularities, or blackouts and brownouts due to demand exceeding supply — and all of that carries costs.

ASCE’s estimates of current 2012 costs to such grid problems are about $6 billion for U.S. households and $10 billion for U.S. businesses. But by 2020, they add up to $71 billion for households and $126 billion for businesses, the report finds. Added up, that $197 billion in costs is nearly twice as much as the $107 billion in investment needed to fix the problem.

via US Grid Has $107B in Investment “Gaps” by 2020 : Greentech Media.

Apr 25

Solar Banking, Part 2: Five Key Considerations in Large-Scale Solar Financing

Bank money remains available for utility scale solar photovoltaic (PV) and concentrating solar power (CSP) projects, bank officers from CITI and Deutsche Bank agree, but not all the banks that participated in project financing in 2011 will return.

“I am somewhat afraid of what happens to these banks as we move into 2012,” said Deutsche Bank Director Vinod Mukani at the Smithers APEX San Diego solar event.

“Europe had a leg up because renewables had a head start there,” the German-based bank’s renewables authority said. “Investors were familiar with this asset class. Now, as they delve into the challenges that Basel III poses, they will have to curtail their activities. That is quite apparent if you look at Q4 of last year.”

Deutsche Bank (DB), Mukani said, “underwrote about a billion dollars’ worth of wind and solar assets in Q4, but the bank group that we started with was not the bank group that we ended with.”

And macroeconomic trends, he explained, such as “southern Europe in crisis, a slowdown of the economy in China, and Basel III regulation” will force banks to face “a very daunting task of deleveraging and meeting the requirements of capital ratios,” Mukani said.

But “large-scale solar assets continue to attract more and more capital,” he added, because of “attractive risk and reward profiles.” All in all, “it’s a good environment,” Mukani said. “There is a tremendous amount of capital that still is available. The question is, how do you get it?”

via Solar Banking, Part 2: Five Key Considerations in Large-Scale Solar Financing : Greentech Media.

Apr 25

Utility execs expect grid parity for renewables by 2030 – survey

Renewable energy generation will not need subsidies by 2030, but the sector still faces a host of challenges to its growth over the next decade, according to a global survey of power and utility executives conducted by consultancy PwC.

Onshore wind, biomass and all forms of solar power generation will be competitive without support by 2030, according to more than 80% of the 71 senior power and utility company executives surveyed by PwC. About 69% said offshore wind will be competitive while 66% believe marine energy will not need subsidies by 2030.

“The report tells us that utility managers have embraced renewable energy,” said David Etheridge, San Francisco-based US power and utilities advisory leader for PwC. “There is a real opportunistic view that costs will come down, technology will change and this will be a viable source of generation for years to come.”

But several major barriers to renewable energy growth will remain over the next decade, namely the high capital cost compared to other forms of generation, according to 75% of the executives. The unwillingness of consumers to pay higher costs for renewable energy was cited by 66% of survey participants. Additionally, 62% stressed the cost and difficulty of grid connections as an important or very important barrier, according to the report.

via Environmental Finance | News | Utility execs expect grid parity for renewables by 2030 – survey.

Apr 25

Climate Goals Require $5 Trillion Investment by 2020

Five trillion dollars of investment is needed worldwide by 2020 in renewable power, energy efficiency and cleaner transportation to contain rising global temperatures, the International Energy Agency said.

After fuel savings of $4 trillion are taken into account, the net investment required by 2020 is about $1 trillion to ensure the temperature gains since industrialization don’t exceed 2 degrees Celsius (3.6 Fahrenheit), IEA Deputy Executive Director Richard Jones told energy ministers from 23 nations today in London.

While renewable energy is on track to deliver its share of the savings, Jones said industries are falling behind in efforts to build projects employing nuclear power, carbon capture and storage, biofuels, efficiency measures and technology that cuts emissions from coal plants.

“Under current policies, we estimate that energy use and CO2 emissions would increase by a third by 2020, and almost double by 2050,” Jones said. “This would likely boost global temperatures at least 6 degrees Celsius. Such an outcome would confront future generations with significant economic, environmental and energy security hardships.”

via Climate Goals Require $5 Trillion Investment by 2020 – Bloomberg.

Apr 25

Solar Banking, Part 1: Smart Financial Engineering Funds the Big Solar Projects

Money is available for utility-scale solar photovoltaic (PV) and concentrating solar power (CSP) projects, bank officers from CITI and Deutsche Bank said, but it is vital to know how to leverage every kind and source of financing.

It’s called financial engineering and it is the only way to fund big solar projects, CITI Managing Director and Alternative Energy Finance Head Marshal Salant insisted at the Smithers APEX solar event in San Diego last week.

The key differences between PV and CSP, Salant said, is that “PV can be done on a much smaller scale and be economic, and a large project can be done in phases. It’s a lot easier to finance $250 million or $500 million than it is to get $3 billion all at once.” CSP requires vital economies of scale “so you’ve got to raise $2 billion all at once. That’s a lot harder to do than to raise $500 million four times.”

via Solar Banking, Part 1: Smart Financial Engineering Funds the Big Solar Projects : Greentech Media.

Apr 23

Investors are Making Money on Renewable Energy

When Prudential Capital Group provided $121 million in financing for an Arizona solar power project earlier this year, and General Electric hit the $1.4 billion mark in solar energy projects it has invested in cumulatively, they weren’t speculating in risky, early-stage technology ventures. They were investing in core infrastructure projects with high gross margins and revenues fixed for 20 to 25 years; “power plants with no fuel costs,” according to Bill Green, senior managing director at Macquarie Capital in New York. Typically, according to Green, investors such as Prudential, Google and GE come in when virtually all the risk has been structured out through long-term agreements with large utilities that agree to purchase the power generated by these renewable energy generation projects. These projects offer stable, low double-digit rate of returns (IRRs) while generally paying out an annual yield in the range of 6-8 percent.

This attractive investment opportunity may surprise those who have seen sharp drops in share prices of companies that make the hardware used by renewable energy projects. Global manufacturers of wind turbines and solar panels have been facing stiff competition from Chinese manufacturers. But the falling price of this equipment has been a boon for renewable energy project developers whose installed costs are dropping dramatically.

via Investors are Making Money on Renewable Energy – Forbes.

Apr 21

Sovereign Wealth Funds and Large Pension Funds: Stymied by Greentech VC

Some very, very large check-writers have been getting bigger and more interested in private equity investments. Sovereign wealth funds and large pension funds don’t get a lot of attention, but they’re huge players in the investment world. And as I’ve been speaking with several members of that community, two points have come through fairly clearly: 1) many (especially those outside the U.S.) are interested in doing direct investments in the cleantech space, broadly defined; and 2) they feel stymied in trying to do so.

They are interested in investing in cleantech markets for the same reason you are, Gentle Reader: because the macro trends are too obvious on a global scale to not eventually result in massive market shifts and the emergence of significant new profit pools.

But when it comes to cleantech venture investments, they’re largely sitting on the sidelines. Why?

First, check size. Talking with these investors, even in their direct investments, they need to write really large checks compared to what most VCs are used to. A $50M check can be perceived as too small of a bet to bother with. And so that significantly limits the universe of types of “venture” deals they can invest in.

via Sovereign Wealth Funds and Large Pension Funds: Stymied by Greentech VC | Cleantech Investing : Greentech Media.

Apr 21

The U.S. Leads in Clean Energy Investments

Last year the United States attracted more private investment in clean energy than any other country, according to a report released today by the Pew Charitable Trusts, “Who’s Winning the Clean Energy Race?” But the findings suggest this was largely because of tax incentives that either have just expired or will expire soon, so the U.S. might not carry this lead into 2012.

The report is a useful resource that outlines where clean-energy investment is going: which countries, which forms of energy, and what types of investment, whether early-stage funding to startups or large-scale project financing.

via The U.S. Leads in Clean Energy Investments – Technology Review.

Apr 21

New NREL Report: Impact of Financial Structure on the Cost of Solar Energy

A new report from the finance team models the effects of tax equity partnership structures on the levelized cost of energy (LCOE) from utility-scale concentrated solar power and PV facilities. The analysis covers three tax equity structures in particular—all-equity partnership flips, leveraged partnership flips, and sale leasebacks—as well as a single-owner structure that uses internal tax appetite. To determine each one’s influence on LCOE, the authors employed the System Advisor Model (SAM), a performance and financial modeling software developed by NREL in conjunction with Sandia National Laboratories, which is available for public use. A few highlights from the analysis are as follows:

All-equity financial structures yield higher LCOEs than those that incorporate project-level debt (which is less expensive than tax equity). In practice, however, the process of securing debt has transaction costs that are unaccounted for in SAM.

Extending the tax equity partner’s payback period can improve LCOE (e.g., a delay from year eight of the project to year nine can reduce LCOE by 7%-27%)

The analysis indicates that projects utilizing PV technology generally have lower LCOEs than projects utilizing CSP (trough and tower) technologies. However, a portion of CSP’s higher costs derive from its perceived technology risk and therefore heightened financing costs. CSP project demonstration and development experience could improve LCOE by lowering debt and equity yields.

via New NREL Report: Impact of Financial Structure on the Cost of Solar Energy | Renewable Energy Project Finance.

Apr 13

US Geothermal Energy State of the Union, 2011-2012

Why isn’t geothermal a larger part of the U.S. energy mix?

“In the last decade, we’ve been rebuilding an industry,” according to Karl Gawell, Executive Director of the Geothermal Energy Association (GEA).

Unlike solar or wind power plants, geothermal energy pumps out predictable baseload power 24 hours a day. There are immense resources in the U.S. and across the globe. And it is relatively inexpensive. Yet it accounts for a small fraction of U.S. energy capacity.

As with any developing resource, geothermal needs consistent federal policy and steady incentives. And the U.S. government just doesn’t engage in consistent, long-term energy policy. Combine that with very low natural gas prices and geothermal growth remains tepid, despite protestations from the trade organization.

The GEA gave an update on the industry this morning, coinciding with the release of a Q1 2012 and 2011 market report.

Gawell of the GEA sees a U.S. geothermal industry “that is still engaged in sustained and steady growth.” He reaches that conclusion by citing a total of five geothermal projects coming on-line in the last five quarters for a total of 91 megawatts. These new projects bring U.S. installed capacity to 3,187 megawatts. Compare that to the U.S. solar industry, which installed 1,800 megawatts in 2011 and will install more than 2,500 megawatts in 2012. (Admittedly, a megawatt of geothermal has a higher capacity value than a megawatt of solar.)

Geothermal firms are currently developing 147 new projects in 15 U.S. states.

The GEA has identified 2,000 megawatts of projects, of which 950 megawatts are in the “advanced stage of development.” There are five projects involved in oil and gas co-production and three enhanced geothermal projects in development. The majority of the projects are concentrated in Nevada and California.

The GEA cited the 49.9-megawatt Hudson One Ranch project as a recent success. We reported on the details of this project last week; it’s the first standalone high-temperature project in the Salton Sea Resource Area in 20 years. Derek Benson, Director of Project Development for Energy Source, remarked that this was “an extremely successful drilling program which found two prolific wells in the resource area” and will employ 55 permanent employees in Imperial County, a region hard hit by the recession.

via US Geothermal Energy State of the Union, 2011-2012 : Greentech Media.

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