Low oil & gas prices impacts financing for renewable energy projects

Ormat's Desert Peak 2 geothermal power plant, Nevada (source: Ormat Technologies)
Alexander Richter Alexander Richter 14 Oct 2015

A recent article by the New York Times looks into the effect that the low oil & gas prices have on financing for renewable energy projects, naming particular the decreasing validity of the Yieldco model.

A recent article in the New York Times looks at the impact of the low oil & gas prices on financing available for renewable energy projects.

In the article, the author says that “low oil and gas prices have roiled the energy markets, and the specter of rising interest rates has rattled investors’ confidence in the industry’s returns.”

She says that while the basic of the business continues to be sound, stock prices have fallen and new approaches for the business of renewable energy development have to be considered.

She particularly talks about the “financing mechanism called a yieldco. Yieldcos, public companies conceived by renewable energy companies as a way to raise cheaper capital for project development, have attracted billions in new investments.”

Examples in the geothermal world are the yieldco company established based on some power generation assets by Ormat, and the one that was planned by Enel Green Power on its U.S. assets.

For these companies creating these structures opened up cash for further development. But this road seems now to be closed, or at least much more difficult.

Geothermal has seen strong challenges in financing in the last couple years, last but not least due to the long time it takes from project start to the generation of revenues from up and running operations.

The article is worth a read if you want to go deeper.

Source: New York Times