With the PV industry, nothing is as it seems. The industry is influenced by a myriad of technological, business, economic and competitive forces both inside and outside the industry. Current media rhetoric holds that the industry is crashing (more on this erroneous assertion in my next post) and the finance community is fleeing the industry. The latter claim couldn’t be further from the truth.
While working on various PV project developments over the years, I often heard from finance entities that they viewed solar PV energy as highly risky, which created a higher cost of capital and demands of higher IRR’s, among other negative effects. As one partner from a large national bank said, “We know how to finance a combined cycle natural gas plant – the entire product comes from GE or other well-known sources and the technology risk is well understood. With PV projects, there are a number of different component brands which make up the generation asset along with a number new variables that we don’t know or understand. It has our risk antennae up significantly.”
But in the past 12 months, and most recently at the REFF 2012 in Manhattan, I am consistently hearing from marquee finance entities that they now view a PV generation asset no differently from other assets, as the risk and business models are now well understood. This is a major milestone for the PV industry, and when combined with the inflection point of declining solar PV energy cost at retail parity with brown fuel generation cost, bodes well for the continual growth of the solar energy in the next 5 years and beyond.