Financial players who abandoned U.S. solar energy projects last year during the throes of the banking crisis are beginning to return, potentially setting up a boom of new deals by the end of the year, several solar investors said on Wednesday.
The 2008 collapse of top solar financier Lehman Brothers and the freeze-up in the global credit markets drove nearly all banks to halt funding for major new solar projects, forcing the makers of systems that turn sunlight into electricity to slash prices for their products and sending their stocks crashing.
Now, with financial markets stabilizing and fresh government incentives for clean energy, many banks are again eyeing the investments under which they fund solar power developments in exchange for renewable energy tax credits.
Those that had left the market are beginning to come back, and come back in a big way, Matt Cheney, chief executive of Renewable Ventures, told the PV America conference.
That would be welcome news to companies such as SunPower Corp, Suntech Power Holdings, SolarWorld AG and others who have seen their share prices cut in half from highs reached last year.
Last week, U.S. Bancorp and privately held SolarCity announced they had teamed up to fund solar projects using the tax incentives to eliminate the purchase and installation costs for homes and businesses.
Banks have traditionally used the tax equity markets to fund solar projects by buying the government tax credits from the project owners. Those owners use that money from the banks to cover the costs of development.
But as credit crisis hit the financial markets, banks' appetite for those tax credits disappeared, shrinking the number of financial players from 20 to about four in the solar sector.
We're beginning to see the thaw in the tax equity markets, Ed Sproll of HSH-Nordbank AG told the conference.
The steep decline in cost of the solar systems -- estimated to be about 30 percent since the beginning of the fourth quarter of 2008 -- has also made funding new projects much easier.
Even with the turbulence in the debt markets and higher costs for borrowing, the lower prices for solar have made the sector attractive, according to Nick Allen, an analyst at Morgan Stanley.
The returns are now to where we're above 10 percent in a lot of cases, Allen said.
That could lead to several large project announcements late this year or early next year, especially since those projects must be started by the end of 2010 in order to qualify for U.S. investment tax credits that were put in place in 2008..