Solar World: Financing solar systems

By LEAH KRAUSS Among solar developer and manufacturer announcements of robust fourth-quarter earnings in the past week, it might have been easy to miss another announcement, by a company with a different approach to the solar energy business model.

San Francisco-based MMA Renewable Ventures is certainly not the only company that finances renewable energy systems or reaches purchase power agreements with customers. But, the main difference is that MMA Renewable Ventures is not integrated vertically, meaning it's a pure financial play, the company ' s chief executive officer, Matt Cheney, wrote to UPI in an e-mail. We finance systems, he said. Under a PPA, the financier builds, owns, and/or operates a power plant and the purchaser agrees to purchase the electricity for a certain amount of time at a certain price. The model allows us to build an on-site power plant that provides reliable, long-term clean energy with no upfront capital costs for the customer, MMA said on its Web site. In other words, a PPA can provide a way to take advantage of solar energy to groups that wouldn't have otherwise been able to finance a project. With the initial investment of installing photovoltaic panels beginning in the tens of thousands of dollars, even after investment tax credits are factored in, this is significant.

The PPA model is the most effective energy financing method, Craig M. Hunt told Renewable Energy Access in late January. Hunt is the co-founder and chief executive officer of Solar Power Partners, a developer, owner and operator of a distributed network of commercial solar energy facilities which also enters into PPAs with customers. Cheney has in the past compared the PPA to other, more familiar consumer concepts: Just like car leases and home loans make those products accessible to consumers, the advent of third-party financing in this sector moves clean energy into the mainstream.MMA Renewable Ventures announced last week that it financed six solar energy projects in the fourth quarter of 2006, at an investment of $39 million.

A major (project selection) factors are the local and regional incentives, which play into the overall finances of the project and can help make the project more cost competitive, Cheney said. Obviously, the quality of the solar resource factors in, but Germany is an excellent example of a less than ideal climate for a booming solar industry, Cheney said. Germany, which on average receives less sunlight than the northern United States, boasts the world ' s biggest solar energy industry. All that said -- MMA Renewable Ventures has not yet seen a project that we can't finance.The company, established as a subsidiary of Dutch utility NUON NV in 1999 and acquired in a management buyout in 2003, also has activities in wind, geothermal, biomass and biofuel projects, Cheney said.

One of the biggest challenges facing the solar industry, and especially financiers, is the high price of silicon, the main ingredient in most photovoltaic panels. A worldwide shortage caused by the imbalance of supply and demand is only expected to ease -- but not entirely subside -- in 2008, when more silicon refineries come online to produce the solar-grade material.

Despite this, the solar industry as a whole and MMA Renewable Ventures in particular are optimistic.

It's no secret that there is a silicon shortage -- price has been substantially increasing for some time and as a result more companies are entering the market, Cheney told UPI. Basic economics tells us that eventually the price will come down -- we are currently seeing about a 7 percent drop each year -- and stabilize, making solar panels cheaper and enabling us to sell power at rates that compete with current utility rates, he continued. For the coming year, he said, the plan is more of everything.

Copyright 2007 by UPI

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