Money Guide: DOE’s NREL, Navigant co-author guidebook to geothermal power finance

In Washington D.C., the U.S. Department of Energy’s National Renewable Energy Laboratory, along with co-author Navigant, have released the Guidebook to Geothermal Power Finance. The guidebook is offered to counter changes in investment in conventional geothermal projects since the economic downturn began in 2008.

Ultimately, it is intended to facilitate further investment in conventional geothermal projects in the U.S. “Investment in conventional geothermal power projects on the utility side of the meter has evolved dramatically since the economic downturn began in 2008,” said Jane Pater Salmon, Associate Director with Navigant, a global services firm. “As a result, developers and investors identified new, innovative ways to address the capital constraints in the marketplace and to take advantage of the new policy incentives that emerged.”

The guidebook relies heavily on interviews with leaders in the field of geothermal project finance. Using the information provided, developers and investors can innovate in new ways, developing partnerships that match investors’ risk tolerance with the capital requirements of geothermal projects in the dynamic and evolving marketplace. It includes a brief primer on geothermal project development.

The document identifies several positive developments in the market for financing conventional geothermal power projects in recent months, including:

• Improved access to capital and financing terms. This is evident in the anticipated return of a specific type of bridge finance to the U.S. geothermal project finance market and in the loosening of construction financing.
• Innovative structures to facilitate deals. Groups of investors are pooling resources to create risk profiles in line with their objectives. Construction and term loans are being bundled, reducing transaction costs and streamlining investment.
• Anticipated return to the tax appetite needed to facilitate tax equity transactions. A return to profitability for many institutional investors is a critical input to successfully monetizing the federal tax credits that complement the Treasury Cash Grant program.

The guidebook will be of interest to developers of conventional geothermal power, as well as investors and regulators.