Sunny Day for Renewable Energy and Green Finance

If you see someone walking around singing “O, Happy Day” or saying they’ve just witnessed a biblical miracle, chances are good that they work in renewable energy or clean-tech.

While commercial real estate readjusts to a much slower economy, renewable energy — and green finance overall — finally got a hard fought boost, buried within the $700 billion bailout package passed by Congress last Friday, October 3rd.  Here’s a ‘hot off the press’ explainer from Stoel & Rives,  describing the extension of the Production Tax Credit and Investment Tax Credit:

“Today the House passed, and President Bush signed into law, H.R. 1424, which includes the Energy Improvement and Extension Act of 2008 (the Act). The Act contains the much-anticipated extension of the production tax credit (PTC) and investment tax credit (ITC) sunset dates.

The Act extends the PTC placed-in-service sunset date for certain wind and refined coal facilities until December 31, 2009, and extends the PTC placed-in-service sunset date for certain other qualifying facilities until December 31, 2010. The Act also expands the PTC to include certain marine and hydrokinetic renewable energy facilities placed in service on or before December 31, 2011.

The Act extends the ITC placed-in-service sunset date for solar, fuel cell and microturbine property until December 31, 2016 and expands the ITC to include combined heat and power system property, qualified small wind energy property, and geothermal heat pump system property.

In addition, H.R. 1424 contains a variety of other renewable energy tax provisions, including provisions allowing the energy credit to offset alternative minimum tax liability; increasing the amount of the biodiesel and renewable diesel fuel credits and extending the sunset dates until December 31, 2009; authorizing new clean renewable energy bonds and qualified energy conservation bonds; and extending the energy efficient commercial buildings deduction and the new energy efficient home credit.”

So, that’s the good news for alternative energy — and for green real estate , too.  The extension of the tax credits help to make the cost of adding renewable energy to a commercial real estate project a bit more competitive. Market transformation continues!

But not so fast, there are still some open issues for renewable energy companies and green real estate investors to navigate. For example:

• Can they get product? There has been a serious shortage of solar supplies and materials for the better part of this year.  Now that the question of government subsidies has been cleared up, many of the solar companies out there do not have the product to sell to real estate owners in any event.  So we’ll be looking to see who actually has locked up the supplier contracts that allow them to deliver on their orders to landlords.

• Do either they or the real estate landlord have access to sufficient capital, at the right price? Look at the capital markets environment that the renewable energy industry has to ramp up in: see all those dying investment banks? That could have been the primary source of funding for large scale financing of alternative energy within real estate.  A good portion of that capital has dried up over the past few months.  And other healthier institutions are sitting quiet for now, till the market weather calms. Also bear in mind that commercial real estate landlords themselves are wading through troubled financial waters, with lots of great green projects getting sidelined till real estate fundamentals strengthen.

In spite of these tough issues, its still good in the green finance world to see alternative energy having a hard-won sunny day.