Renewable Energy Hurt by Financial Crisis

Ok, so this gets a bit complicated, but it is important.

A fairly complex tax-credit system underwrites renewable-energy projects. It provides incentives for developers of currently unprofitable renewable energy projects to team with large, money making businesses that can trade cash for tax credits. The collapse of the financial industry has left the renewables sector with significantly fewer partners to work with.

Before the collapse there were 18-19 tax equity investors-- think Wachovia, Morgan Stanley, Lehman Brothers, AIG, and GE Financial Services. Typically, these big fiancial instituitons have larger federal tax liabilities adn are willing to purchase the equity in a renewable project. They return the equity once the tax credit has been used. However, the finanical industry no longer has cash to buy the renewables companies and they lack strong balance sheets for the tax offsets.

The upshot is that investing has slowed. The wind, solar and geothermal industries are hoping that the system could be converted to a refundable credit that would allow developers to get checks from the Treasury for the value of the incentive, rather than finding partners. If not, the industry needs to seek out new partners. One option is looking to more conventional energy production companies like Exxon Mobil or new economy firms like Google.