L R AS Published on Saturday 2 May 2020 - n° 320 - Categories:funding
Financing RE construction before, rather than after
How to save jobs in renewable energy in the United States?
The coronavirus crisis has hit American companies hard. It has brought much of the economy to a standstill. Although the most visible impacts have been in hotels and restaurants, the high-tech energy sector has also been hit hard.
The best way to stimulate a return to activity is not to go through the usual tax credit channel, as you need to have built to benefit from it. It is preferable to obtain direct payment by the administration to finance new energy installations. This would reduce the control of banks over financing, which take 13% of the funds that pass through them. Only the best-capitalised developers can today access equity financing (tax credits). Even this system may not last long.
With advance payment, there would be no difference in the amount spent. Above all, this process would have an immediate effect on the US economy since a majority of companies have stopped hiring or reduced their workforce; 84% of companies report that their projects have been stopped, delayed or cancelled. Nearly two-thirds of businesses report that the federal relief measures did not provide any assistance; nearly half of the businesses report revenues 25-50% lower than expected.
GreenTech Media of April 29
Editor's note It is easier to compensate a completed project than to lend to someone to build. Who says he won't pocket the money and disappear?
On the other hand, in terms of economic efficiency, the prepayment formula makes it easier to raise the necessary capital and launch a construction project more quickly. It is more efficient and boosts the economy more quickly. This was what happened in 2008/2009 in the United States, which recovered more quickly than Europe, which favoured the advantage in hindsight. The disadvantage of this formula is that it shifts the control of the banks to the administration.
