Financing Renewable Energy Projects In Difficult Economic Times

Abstract

ABSTRACT Successful renewable energy developers are able to obtain and retain project financing. Their projects are typically funded through a combination of equity provided by the developer and investors, as well as short- and long-term debt provided by lenders. Despite the political appeal of renewable energy projects and the popular perception that massive amounts of funding are readily available at the turn of a tap, developers face increased difficulty in the current economic environment in obtaining both equity and debt financing for projects. Equity participants, lenders, and other project participants are applying more stringent evaluations of the operations, finances, and credit of the developer. Additionally, because the cooling of the economy has slowed energy demand, utilities not subject to mandatory standards are less eager to pay a premium for green power. It is more important than ever for developers to explore every avenue of project funding to ensure a successful, viable project. This article includes a discussion of federal tax credits, grants, and other financial incentives available for renewable energy projects. In determining the scope, amount, and timing of their investment, project participants such as developers, investors, and lenders must study and become familiar with current and proposed incentives.