This week in green energy: A steady stream of project announcements but will they get financed?
This week saw a steady stream of press releases by power utilities and independent developers announcing long-term power purchase agreements. A random sampling includes: Millenium Solar clinching a long-term PPA with Southern California Edison for 242 megawatts of solar-generated electricity; in Ohio, American Electric Power (AEP) announced a contract to purchase all of the output of the 10-megawatt Wyandot project; Irish developer, Mainstream Renewable Power did not (yet) clinch a PPA but announced the acquisition of three wind projects in Illinois, which are expected to generate a combined 787 megawatts of electricity by 2013.
While the constant stream of project announcements underscores ongoing appetite for clean energy projects, none have yet secured funding. Funding is available but securing it, given the current economy, remains challenging, one developer tells GER. He notes that before the economic crisis, a project backed by a strong PPA could put down 10% of the project costs and fund the rest on debt. That’s no longer the case. Now, debt-to-equity ratios are more likely to hover around 60-40 percent or 70-30 percent. That’s why the government is stepping in with different funding options that include cash grants, Investment Tax Credits (ITC), and Production Tax Credits (PTC).
This week, the Department of Energy also announced that it would distribute $18.5 billion in federal loan guarantees to four companies: UniStar Nuclear Energy, NRG Energy, Scana and Southern Co. in a bid to jumpstart nuclear plant construction — the first of these could come online by 2015 or 2016.
While nuclear power plants generate their share of environmental and security concerns, there’s growing agreement that without a renewed nuclear portfolio, the U.S. will not significantly cut CO2 emissions.
The nuclear option is not cheap and therefore can’t be pursued without strong government-backing. Cap-and-trade’s expected revenues could help fund the overall nuclear effort, John Podesta, president of the Center for American Progress, recently said. One estimate puts cap-and-trade revenues at $640 billion. Some counter the actual number is actually three to four times larger. Podesta’s idea makes financial sense and is also politically shrewd as it could convince Republicans — who largely oppose any form of carbon taxation– to support the Waxman-Markey bill’s cap-and-trade provision. Republicans are pro-nuclear; the energy legistlation they released earlier this month called for the construction of 100 nuclear power plants over the next 20 years.
Separately, the Senate Energy and Natural Resources Committee approved this week its own energy bill in a 15-8 vote. The bill calls for the construction of new nuclear power plants. Unlike Waxman-Markey, it supports offshore oil and gas development and also gives the Federal Energy Regulatory Commission authority to approve the siting of high voltage power lines if states fail to approve them in a timely manner. This provision could kickstart the construction of power lines linking largely remote clean energy power plants to mostly urban electricity markets and spurt construction of more green energy projects.
