Meltdown watch, continued. Capital is quickly drying up for new clean-energy projects, and what is available costs more, throwing a wrench into companies’ plans to expand renewable energy.
General Electric is the latest to throw in the towel, after the abrupt departure of Lehman Brothers and Morgan Stanley. The conglomerate, which makes energy gear like wind and gas turbines as well as underwriting renewable-energy projects, says it is bailing out of the clean-tech investment game for now, once it finishes with existing projects. From Dow Jones Clean Tech Insight:
“Right now we can’t price a deal,” said [GE Financial Services managing director Timothy] Howell in an interview with Clean Technology Insight on the sidelines of the Solar Power International conference in San Diego, Calif. “We can’t go out and borrow. So we can’t commit to a deal today.”
GE Financial Services, like GE’s energy-infrastructure unit, was very bullish on the sector’s prospects just a few months ago. Most clean-energy projects like wind and solar power depend on investments by companies like GE or big banks, which put up development capital to get their mitts on years of tax breaks. That’s the main way that tax credits help fuel the growth of alternative energy.
But while the financial bailout bill extended tax credits for clean energy, the bill hasn’t yet goosed the credit markets into lending freely. That — not uncertainty over federal subsidies — has now become clean-energy’s bogeyman.
As head of communications at GE Energy Financial Services, I want to set the record straight. The blog post about GE’s renewable energy investing is misleading, does not capture the complete picture and draws an exaggerated conclusion. GE has been — and will remain — a significant investor in renewable energy, both through its manufacturing and research and development operations, its renewable energy project equity and debt investing, and its venture capital investing. The GE company as a whole plans to invest more than $1.4 billion in cleaner research and development this year. GE’s energy investing arm, GE Energy Financial Services, is a long-term player that sees business benefits from renewable energy, with the ability to ride out difficult business conditions like we and every other industry player face now. These problems are centered around the financial markets, not the strong fundamentals of renewable energy or of GE itself. The core issue is the industry-wide difficulty of committing to new investments in a period of high uncertainty about borrowing costs. Such transactions usually involve staged funding, and the market volatility makes forward committing to fundings expensive to developers and ultimately to consumers of renewable energy.