Seventeen wind deals are coming to market in 2008, bringing about $8.2 billion worth of tax equity into the marketplace for wind alone in 2008, said JPMorgan Capital Corp. Managing Director of Energy Investments John Eber.

"The renewable industry is certainly experiencing unprecedented growth," Eber said at a renewable energy finance conference in New York on June 18. "Along with that, we're seeing predominant growth in the demand for tax equity. This is being driven really by two factors: the federal supports coming in through the [production tax credit] and [investment tax credit], as well as the renewable portfolio standards that we see now in 25 different states."

So far, more than $4 billion has come to market in 2008, compared to $5.2 billion for the 18 wind deals that came to market for all of 2007, he said.

According to an analysis of AWEA figures, tax equity financing has increased dramatically, in tandem with wind installations, since 2003.

In 2003 and 2004, around 25% of the megawatts delivered and installed were financed through tax equity. That percentage rose to 49.7% in 2006, and to 68.7% in 2007. Tax equity financed 95% of the total wind projects in 2007 and is projected to finance approximately 90% of the wind projects in 2008, Eber said.

Add to that solar photovoltaic and geothermal projects, and total tax equity for 2008 could be as much as $10.85 billion, he said. This figure excludes solar thermal projects, which could each add about $700 million of tax equity to the total, Eber estimated.

JPMorgan has been a principal investor in the renewable marketplace, Eber said, with $4.5 billion raised in tax equity since 2003 through 27 transactions.

"There are 4,300 MW of power that we have interest in, and hopefully in 2008 we'll be adding 2,000 MW to that," Eber said.

Debt financing has also seen rapid growth. Between 2006 and 2007, debt financing increased by $4.5 billion, or about 120%, Eber said.

Of the 18 wind transactions that took place in 2007, only two were financed with project level debt. Of the 17 coming to market so far in 2008, only two will be financed with project-level debt as well.

Uncertainty about extension of PTC hampering growth and consolidation

Jeopardizing all this growth, however, is the possible expiration of the production tax credit at the end of 2008.

"If we don't get something done in the next 30 days or so, we're going to start seeing facilities being delayed, turbines moved offshore," Eber warned. "We've got to get Congress to try to do something for us because it's starting to look like it's going to have an impact on expected deliveries."

Lack of clarity surrounding when or whether the PTC will be extended has hampered wind development and consolidation.

"I think a lot of corporate buyers are very nervous about the PTC issue," said Credit Suisse Group AG Managing Director and Co-Head of Alternative Energy Raymond Wood. "Not that it won't eventually get extended but that ... waiting for that extension ... will cause significant dilution because the low-cost bank capital that the wind developers have been addicted to won't be available in the type of loan-to-value ratio that they've come to expect and rely on."

As a result, either growth will have to slow, turbine vendors will have to settle for a smaller deposit or "they need to sell themselves to someone who's willing to wear that risk, and that's bringing down returns in a hurry," Wood said.

Installed capacity for wind increased by 45% in the United States in 2007, with 5,249 MW of new wind power installed, primarily driven by the tax incentives that were extended by the Energy Policy Act of 2005. During years that the production tax credit was not available, investment and installation in wind dropped by 90% in 2000, 76% in 2002, and 77% 2004.

"The consequences of this on-again/off-again policy we've grown to live with and really can't tolerate further, it really is dramatic on installed capacity when the PTCs are not extended," said GE Energy Financial Services Managing Director of Renewable Energy Kevin Walsh.

GE Energy Financial Services will invest $2 billion in renewable energy in 2008, separately from investments by GE Energy, Walsh said, later emphasizing that the company is "not captive" to the U.S. market.

"This is a global market. If we don't have the incentives, we're going to invest elsewhere. To have stable policies, to have the right risk reward, whether it's China or Europe or wherever, that's where the money is going to go," Walsh said.

That said, the general consensus among presenters at the conference was that the PTC would eventually be extended.

"Unfortunately ... my sense is that the political atmosphere is such that we may have to wait till the end of the year [for the] change of administration ... before it's successful," Eber said.