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Solar Energy Getting A Boost In Funding

As the economy begins to get better ( in reality, it seems to be just leveling off) people are looking for those Chairman Bernake coined "green chutes."  These "chutes" are not really slides in mines that you use to try and escape evil warlords (I watched too much Indiana Jones as a child) but areas of the economy that seem to be improving at a faster rate than the economy as a whole.  I like to think of them as glimmers of hope.  So where is the next glimmer?  It is in the solar sector according to a couple nuggets of funding news.

Solar Energy, Borrego Solar

First up is SunRun.  This San Francisco, California based company recently acquired $18 million in funding.  This start-up, which focuses on financing residential solar installation, is planning to expand throughout the United States from its base markets of California, Arizona and Massachusetts.

Second, Borrego Solar Systems recently announced an additional $30 million in equity backing for projects in the United States.  This company also finances solar installation but does so in the commercial sector.

That adds up to $45 million in funding for two small solar companies in the greatest rescission since the 1940's.  Great news, right?  Well, not all is rosy according to Danny LaMonica of GreenTech.

Mr. LaMonica believes that both of the private financing these two companies are receiving are actually proof of an overall weakening financing picture in the solar sector.  LaMonica points out that Borrego is involved in power-purchase agreements (PPAs) — contracts providing upfront financing of a solar-power system in exchange for agreements with customers to buy the resulting power at a fixed rate.  This same type of deal is used in the residential business model of SunRun.  The idea is based on the notion that individuals will want a reliable source of power at a fixed rate, especially with likely dramatic increases in the next decade.  This type of financing instrument, which guarantees purchase from the consumer for 10 to 20 years, is new and really untested in the solar field.  Why then is big number investment getting behind this?

Simple, says LaMonica, because bank financed projects have dried up.  "The return for renewable-energy projects is generally considered predictable and low risk. But most of the banks that provided tax equity funds for renewable energy have exited the market in the past year."  In reality, it shows that many solar company's traditonal bank financed backing is gone and new, more experimental ways must be found.

I do understand Mr. LaMonica's analysis and agree in some respect, but I think this is not so cut and dry.  Though it may not be bank backed financing, IT IS FINANCING during this recession.  I think you cannot discount this fact.  Also, while it is a new model for solar installation it could possibly be the best.  In this model the consumer does not have to deal with installation or upkeep, only paying for the electricity.  This is a much closer facsimile of how consumers get their power today. No one has there own coal power plant, we all buy it from a privately operated one.  Why then try to make individuals mini-solar plant operators?  By removing this added worry and expense, solar then seems a more stable venture for consumers to enter into.  This is only sweetened by a fixed rate. So, I believe while these financing deals may imply so negative market forces, as a whole they provide an example of "green chutes" in the U.S. economy.

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