Greek Crisis, Euro Snare Renewable-Energy Companies
Source: Bloomberg, Ben Sills and Mark Scott (5/20/10)
"Uncertainty in Europe is a further burden in a market that is still challenging."
That's because few wind, solar, and other green power installations would be profitable without subsidies, and as governments across Europe curb spending in response to the Greek crisis, those funds are being cut back, Bloomberg BusinessWeek reports in its May 24 issue.
"The uncertainty in Europe is a further burden in a market that is still challenging," said Kathleen McGinty, a former adviser to President Bill Clinton's administration who now helps manage $800 million in clean-energy investments as a partner at private equity firm Element Partners in Radnor, Pennsylvania.
The aid to renewable energy, paid by consumers in their power bills, is being slashed by governments that want to cut costs for businesses to boost economic growth and generate tax revenue as bond investors scrutinize their plans to rein in budget deficits more than three times the European Union limit.
German lawmakers on May 6 reduced subsidies to new solar plants by as much as 16%. Italian solar industry groups expect support for new generators to be scaled back by as much as a quarter in June.
In Spain, producers have offered reductions of up to 30% on subsidies for new solar cell installations. The government may also cut its backing for existing plants, which had been built with an expectation of guaranteed prices for 25 years.
Potential cuts in renewable prices "could delay our plans in Spain, but we would allocate our production capacity elsewhere, particularly to China and the U.S.," said Jose Luis Blanco, director of offshore wind at Gamesa. "Other markets are becoming more important to us than Spain."
Uncertainty about future subsidies is making it harder for renewable companies to secure funding.