1 March 2010 -- While the federal economic stimulus package has done a good job to stimulate manufacturers and developers of renewable energy generating assets, supply could outstrip demand in the coming months leading to underused and even potentially stranded generation assets.
"In 2009 the supply (of assets and projects) was less than demand," said Ken Bruder, general manager North America for Bloomberg New Energy Finance, speaking Feb. 25 at the Renewable Energy World Conference & Expo in Austin, Texas. "In 2010 we are starting to see the amount of supply outstrip demand." He said federal policies might be needed to stimulate demand. Both total electricity demand and total generation fell in 2009.
At the same time, Asia has overtaken the United States for first place in renewable energy project finance. Bruder credited the existence of stricter policies and clearer policy goals for renewable energy as contributing to the shift.
Bruder said that "precipitous" declines in the cost of some renewable energy components, for example, solar silicon for photovoltaic installations, has not necessarily led to lower levelized costs of energy (LCOE). The reason, he said, is that financing costs are rising creating a "non-virtuous cycle."
"Raw material costs are coming down, but we are not seeing LCOE costs going down," he said.
Ed Feo, a Los Angeles-based attorney with the Millbank law firm, said over a six-month period in 2009, the federal government's Treasury grant program distributed $2.4 billion for renewable energy projects. Of the projects funded, around 85 percent were wind related. He said that debt pricing before the financial crisis was between 1 percent to 1.5 percent over the cost of funds. Current pricing may be as high as 3.5 percent over the cost of funds. The uptick in the cost of debt financing haas contributed to stagnant LCOE even as components costs have dropped.