EU PVSEC: PV investment potential still largely untapped, says Citigroup head

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A leading renewable energy finance expert has delivered an upbeat assessment of the global PV industry's prospects for securing future investment.

Addressing an audience at EU PVSEC in Paris yesterday, Michael Eckhart, global head of environmental finance and sustainability at global investment bank Citigroup, said PV’s success in proving itself to be a stable asset class was making capital for the industry cheaper to access.

Eckhart said PV had so far attracted some US$100 billion in investment over its lifetime, against US$1 trillion invested in renewable energy generally and US$130 trillion invested in the debt and capital markets.

“PV is only just discovering how much money is out there; there’s a lot of capital still to go,” he said.

Eckhart said the biggest recent trend he had noticed was in the widespread re-financing of PV projects as emerging evidence of the sector’s bankability drives down the cost of accessing capital. He estimated that half of the capital flowing into PV now is from re-financing deals as the sector looks to take advantage of its ability to access lower cost capital.

But Eckhart said the PV industry needed to fight against what he predicted would be the progressive withdrawal over the next three to five years of public support programmes for solar such as feed-in tariffs, which he said were vital to keeping the cost of capital down.

He said in some countries these support mechanisms had mistakenly been constructed as a ‘subsidy’ for the technology, when the original intention behind them was that they were to attract affordable debt capital into the sector.

“There are two kinds of feed-in tariff. In Germany, the cost is contained in the electric system, and rate payers pay for it; there’s no cost to the taxpayer or government,” Eckhart said.

“Then you’ve got what you have in Spain – a subsidy of electricity, so any added cost flows immediately to government. So here we have taxpayers paying for electricity. Other countries should have done what Germany did and kept the cost contained in the supply system, not let it flow over to the taxpayers. And that’s the issue across Europe, where governments are picking up like €30 billion as in Spain – of course they’re cutting back, they’ve got big national debt.”

Eckhart said the industry needed to resist efforts to shut down national support programmes.

“I’m urging the industry not to let that happen,” he said. “You’ve got to keep that 20-year commitment [from feed-in tariffs], because that’s what’s bringing in the low-cost debt. If you don’t have that, you won’t have any low-cost debt; you’ll have to have equity capital, which is much more expensive.”

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