Amid green energy euphoria, some solar concerns
SAN DIEGO, Oct 17 (Reuters) - Matt Cheney said he felt like the boy who cries "The emperor has no clothes," during this week's Solar Power International conference in San Diego.
Talk from industry executives featured a rosy future for solar power, despite worldwide recession fears.
"Hey, didn't anybody around here notice the dive the markets took last week?" said Cheney, the CEO of MMA Renewable Ventures, which builds solar power plants.
The solar industry has a lot to be happy about. It got a shot in the arm this month when Congress passed as part of a financial bailout package extensions through 2016 of commercial and residential solar investment tax credits for 30 percent of the cost of the systems. It also eliminated the cap for home solar installations and allowed utilities to take the credits.
The tax credits, high costs of traditional fuel, and a belief that creditors would fund high-quality green projects cheered many in the industry.
But Cheney, who heads a unit of Municipal Mortgage & Equity LLC (MMAB.PK), still says growth will be hemmed in by banks' reluctance to lend -- for as much as four years.
He said he fears a huge slowdown for solar projects on roofs of warehouses, offices and commercial space, because the owners of those buildings don't have access to capital.
Companies with mid-level credit ratings six months ago "could be bootstrapped up" in projects with firms such as MMA Renewable Ventures. They no longer can be.
"You can't justify that at the committee of the financial institutions anymore, so it is just not going to happen," Cheney said.
Skip Grow, managing director at Lazard Freres & Co, offered similar warnings.
"The bigger issue the credit crunch brings is the potential unavailability of project finance," said Grow. "Most of the publicly traded solar manufacturers are fully funded. But they are ultimately selling to project developers -- and funding the buildout of these solar projects. That's where the biggest question mark is -- will project finance continue to be available?"
Even some of the more optimistic in the industry see higher borrowing costs.
"Overall fundamentals to finance solar systems remain in place, though risk spreads have widened," SunPower SPWR.O Chief Executive Tom Werner said on a conference call this week about the company's quarterly earnings.
Grow himself saw broader issues.
"Any sort of solar products, panel, module, cell, ingot manufacturer that doesn't have their factories fully paid for are the ones who will potentially suffer. They are typically the smaller ones. But even the larger ones may have to scale back their expansion plans," he said. (Editing by Peter Henderson, Gary Hill)
