Can “Green Power Insurance” Boost the Renewable Energy Industry?

Abstract

The development of renewable power
projects can be hindered by many things. Cost,
public opposition, and lack of consumer un-
derstanding about the effects of different power generation technologies
are just a few. A lesser known restraint, however, is the scarcity of fi-
nancing options available for the development of renewable generation.
Prior to deregulation, power plants were built according to need
and utilities had a captive customer base and were able to charge a
regulated rate for electricity. Lending institutions offered reasonable in-
terest rates because there was strong assurance that the investment
would be recouped. The market is still principally supplied by facilities
that were built with the guarantee that utilities would purchase the
power. In a competitive market, however, no such guarantees exist for
those building new generation facilities. Absent customer choice, the
majority of power producers will construct generating capacity only
under favorable financing terms. Green power is still a niche market and
generally available at premium prices which limits the number of cus-
tomers a marketer might acquire