NEW YORK (Reuters) - General Electric’s Energy Financial Services is working on thousands of megawatts of U.S. renewable energy projects, but is not likely to move forward until the government sets rules for its grants and loans to the sector, an executive in the company’s energy business said on Tuesday.
Funding for new clean energy projects largely dried up last year because of the crisis in the financial markets, prompting the Obama Administration to expand government spending to support renewable power sources.
The industry has been awaiting new rules from the Department of Energy on implementation of its grant program, designed to allow companies to tap into funds intended for tax credits, and on how it will release more than $48 billion in loan guarantees.
Those government measures will change how developers of wind, solar, geothermal and hydropower projects finance their construction, which in turn will determine returns for investors such as GE’s EFS.
“In this environment, no one’s going to get (financing) approval to do anything now,” Tim Howell, commercial leader of EFS’ power and renewable energy business, told Reuters in an interview.
EFS has $4 billion to spend on new energy projects, including renewables and conventional power plants, such as gas-fired generation, he said.
The company will be able to move more quickly with its equity investments than banks using debt financing for projects, he said. Debt financing typically takes at least two months to put in place.
Still, with the turbulence in the financial markets, Howell said there was not likely to be a flood of new renewable projects announced once the government’s rules were released.
“I don’t think that there is the capacity in debt or equity markets to just turn this on like a spigot,” he said.
In April, EFS invested more than $200 million with Noble Environmental Power for 330 megawatts of wind power in New York state and has said it was considering buying into a 300 MW wind farm in British Columbia, Canada with Plutonic Power Corp, with whom it has also partnered for hydropower projects.
Wind power, which made up more than 40 percent of the new electricity generation built in the United States last year, remains the most competitive renewable energy versus conventional power sources, Howell said, but photovoltaic solar power costs were dropping fast and closing the gap with wind power.
“We’d love to do more solar, but it’s tough because there aren’t that many deals of scale,” he said.
Still, EFS has linked up with solar power maker SunPower Corp for a 2.2 MW project that put solar panels on a California jail and two wastewater treatment plants under a deal in which SunPower sold the electricity output through long-term power purchase agreements.
EFS is also wary of concentrated solar power plants, which focus sunlight with mirrors to produce heat used to run a conventional electricity turbine.
“Concentrated solar is having a tough time getting out the starting blocks,” he said, largely because of the complexity of the financing and other issues with the projects.
Reporting by Matt Daily; editing by Carol Bishopric