The Week In Green Energy: During Summer Doldrums Renewable Energy Funding Heats Up

NEW YORK - JULY 6: A girl runs through a water fountain to cool off on July 6, 2010 in the Brooklyn borough of New York City. The National Weather Service has issued a heat advisory for parts of the Northeast, mid-Atlantic and parts of Michigan and Kentucky with temperatures in some areas predicted to reach 100 degrees. (Photo by Ramin Talaie/Getty Images)

The sweltering heat that has hammered the East Coast for the better part of the week did not dry up the renewable energy deal flow, as some developers managed to clinch crucial funding. And as is often the case these days — especially in the cleantech and renewable energy sectors — Washington was the de facto deal maker. Hence, as we headed into the Fourth of July weekend, President Obama announced some $2 billion in Department of Energy loan guarantees supporting solar developers.

Of the $2 billion announced by the President, Spanish company Abengoa Solar got $1.45 billion for the construction of the 250 megawatt Solana Concentrating Solar Power (CSP) plant in Arizona. Colorado-based start-up Abound Solar also scored a $400 million guarantee to scale production of its thin-film, photovoltaic modules from a current 67 megawatts to nearly 1 gigawatt over the next three years.

In this sluggish economy where funding is still hard to access, the guarantees announced by Obama, underscore the weight of government in the renewable energy and cleantech sectors. While banks say they are open for business, their credit requirements are much tighter, making it difficult for developers to finance projects. This is particularly true now, with rumors of a double dip recession running amok.  As we’ve said before, these days, funders, be they banks or early-stage investors, are hungry for the sort of security and certainty only the federal government can offer, at least for now. Indeed, with the sun setting on key stimulus-funded programs (like the 1603 cash-grants) at the end of the year, the renewable energy industry is pressing for more government cash, arguing that now is not the time to rail in spending. “On the line are thousands of jobs, [and] more than five gigawatts of clean energy capacity,” warned Neil Auerbach, a managing partner at cleantech-focused private equity fund Hudson Clean Energy Partners, at the Renewable Energy Finance Forum last week in New York.

While U.S. green investors and developers are wrestling with regulatory uncertainty, Canada’s most populous province, Ontario, continues to demonstrate just how effective a market with regulatory certainty can be. These days, project finance bankers in New York will tell you that if they are working on deals, many are north of the border, in Ontario where the province’s solar-feed-in tariff and RESOP program, which assures wind and solar power developer long-term off take agreements with the provincial utility, are guarantees funders will bank on. Just this week we reported on German bank Norddeutsche Landesbank Girozentrale (Nord/LB) closing a $60 million financing to support the construction of 20 megawatts in new solar generation.

Now, let’s be fair.  Despite ongoing regulatory uncertainty, the U.S. remains an attractive market. Indeed some investors are confident that in an environment where carbon will eventually be priced, even with short-term growing pains, renewable energy remains a winning proposition.  That’s what likely motivated Atlantic Power Corporation, a Boston-based independent power producer, to fork over $40 million this week for a 27 percent stake in Idaho Wind Partners 1, a development company overseeing the construction of 11 wind farms in Twin Falls, Idaho that combined will generate more than 180 megawatts of electricity.

VC and PE Watch

Toronto-based Morgan Solar is close to hiring its first-ever Chief Executive Officer. The developer of low-cost concentrating photovoltaic modules could make a formal announcement as early as next month, an industry source told G.E.R. Turnstone Capital, Inversiones Financieras Perseo, the venture arm of Iberdrola Renewables and the New Ventures Group back Morgan Solar.

Solasta, the Massachusetts solar cell startup,  has closed.  In 2008 the company raised a Series A from Kleiner Perkins Caufield & Byers. The company had also scored a $2.7 million Department of Energy loan guarantee.

San Mateo, Calif.-based eMeter Corporation, a developer of management software for the smart grid industry, raised $12.5 million in new funding from returning investors Sequoia Capital and Foundation Capital. Northgate Capital also participated in the funding as a first-time investor.

Palo Alto, Calif., -based venture capital firm Venrock raised $350 million for its sixth fund, Venrock VI, which will support energy start-ups as well as early stage technology and healthcare companies.

Texas Pacific Group (TPG) and Brazilian buyout fund Gavea Investimentos made a $226 million joint investment for a 25 percent stake in Rumo Logistica, a unit of Cosan, the world’s largest producer of sugar-based ethanol.

Rambling

Germany, one of the world’s largest solar power markets, had some good news for solar companies like First Solar. On Friday, the country’s upper house delayed cuts in the country’s popular solar feed-in tariffs. The cuts were actually set to come into effect last week but instead will be implemented over a slightly longer time period. Under this latest compromise, retroactively from July 1, subsidies for roof-mounted PV solar-electricity facilities will be cut by 13 percent instead of the original 16 percent cut, writes Dow Jones Newswires via the Wall Street Journal. Subsidies backing large solar farms will be cut by 12 percent, from a planned 15 percent. The subsidies will be cut by another 3 percent come October. The cuts in subsidies, which, in a relatively short time, helped turn Germany and its damp continental climate into a solar power house, are a strong indication from the world’s third-largest economy that, as one consultant recently told us, the global green sector is “entering a period of fiscal austerity.”

Photo: Ramin Talaie, Getty Images – PicApp

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