Wall Street has less appetite for risky green projects

INDIAN WELLS, California Fri Feb 8, 2008 1:23am GMT

Power-generating windmill turbines form a wind farm on Backbone Mountain near Thomas, West Virginia August 28, 2006. Big-scale renewable energy projects demonstrating new technologies will have a harder time getting Wall Street funding due to shaky credit markets and plunging stock prices, a Morgan Stanley managing director said on Thursday. REUTERS/Jonathan Ernst

Power-generating windmill turbines form a wind farm on Backbone Mountain near Thomas, West Virginia August 28, 2006. Big-scale renewable energy projects demonstrating new technologies will have a harder time getting Wall Street funding due to shaky credit markets and plunging stock prices, a Morgan Stanley managing director said on Thursday.

Credit: Reuters/Jonathan Ernst

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INDIAN WELLS, California (Reuters) - Big-scale renewable energy projects demonstrating new technologies will have a harder time getting Wall Street funding due to shaky credit markets and plunging stock prices, a Morgan Stanley (MS.N) managing director said on Thursday.

"Right now with the stock market not being its healthiest, the sort of plain vanilla non-emerging technologies -- those are the projects that are going to get financed," Aaron Lubowitz, managing director in Morgan Stanley's global structured products group, said during a panel at the Clean-tech Investor Summit in Indian Wells, California.

The alternative energy sector has long had a difficult time building big projects. The stage between successfully developing a new technology and amassing scale is often referred to in the industry as the "Valley of Death," Dan Reicher, director of climate and energy initiatives for Google Inc's philanthropic arm said on Wednesday. Google.org aims to make investments in large-scale renewable projects.

Scott Brown, chief executive of renewable energy private equity fund New Energy Capital, said it was "very challenging" for new technologies to gain funding for large-scale projects without finding ways to minimize the risk a lender takes on.

Brown also said that an economic slowdown significant enough to depress the growth of electricity demand could impact growth of the ballooning renewable industry.

Morgan's Lubowitz said there was much more appetite for small, high-risk technology projects 12 to 24 months ago.

"There is going to be less of that until some of the regulatory issues get resolved, until the market is a little bit healthier and until we see some of these credit markets stabilizing," he said.

On a brighter note, Lubowitz said Wall Street was optimistic that an extension to federal tax credits for renewable energy sources would come before they expire at the end of this year.

"The broad market feels an extension is coming," Lubowitz said. "People are going about their business as usual... you can't just stop on a dime. Having said that, if we don't see an extension by the end of the year, you will see a pullback in some way shape or form."

(Editing by Gary Hill)

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