25 Jul 2018

Read our article on Renewables + magazine

It can be difficult for large renewable energy projects to obtain financing from the private sector. Although the situation is improving, commercial lenders may still be unable or unwilling to accept the perceived credit or country risks. Thankfully for renewable energy providers worldwide, and for US companies developing technologies in this sector, these are exactly the types of project that the Export–Import Bank of the United States (EXIM) helps to finance.

As the official US export credit agency with a mandate to support the export of US goods and services, EXIM has been facilitating finance for potentially risky international projects since 1934. We opened our portfolio to the renewable energy sector back in 2005 and now provide comprehensive short- and medium-term financial services for solar and wind energy projects worldwide. These services include working capital, insurance, loan guarantees and direct loans. I manage EXIM’s renewable energy portfolio from a technical perspective. My primary responsibility is to evaluate and mitigate technical risks across the lifecycle of a project, from development to operation to repowering. So what are those risks, and what are the trends?

Firstly, the science and measurement technology for renewable energy resources has improved greatly in the past 10 years. Wind resource measurements have become more sophisticated, allowing wind turbine manufacturers to tailor their designs to a site’s specific wind class and conditions. For solar, on-site ground pyrometer and particulate measurements have optimised solar energy resource analysis. The IEC 61215 standard, covering accelerated life testing for PV modules, should continue to develop.

Greater knowledge of technical risks helps us to better assess the financial risks of a renewable energy project. As a bank, our credit risk review is similar to that of international commercial banks. However, since we are backed by the United States government, we have no fiscal exposure limits in any markets or technology. With our years of experience operating in developing countries and our careful vetting processes, we have had great successes working in these markets while sustaining an active default rate of less than 0.5%.

We tend to react to the needs of the market rather than promote market development. However, in general, EXIM has been most needed in markets in transition from sovereign lending (shouldered or guaranteed by multilateral development banks like the World Bank or EBRD) to international commercial lending. This transition to commercial lending acceptance does not always run smoothly and in one direction: some countries do falter. However long markets remain in transition, we are greatly and continually needed.

One of the factors we look at when evaluating renewable energy projects is the main driver for that project. For most customers, this is some level of energy independence from fossil fuels. In addition to having good solar or wind resources and profitable capital projects, the mix and desire for renewable energy depends on electrical network capacity, the countries’ planning and price incentives, and political acceptance across the government.

From an investment point of view, it is interesting to look at specific projects in the context of global trends in the renewables sector. In the near term, I see solar PV energy generation growth increasing relative to onshore wind energy generation. Solar PV manufacturing costs are falling, while new technologies such as PERC cells are increasing energy conversion efficiencies and scalability. These factors are making solar generation more compelling than ever.

The long-term goal is for renewables to eclipse thermal generation as baseload generation. For this to happen, we need a parallel and complementary system of energy storage. In addition to renewable energy, I also evaluate energy storage transactions for EXIM, including applications for transportation and electric utilities. So I can confirm from personal experience that the US is home to many promising electrochemical and mechanical energy storage technologies.

Every project is a new adventure with its unique personalities, location and challenges. These complexities require experienced people to resolve them. Classification societies, certification bodies and consulting engineers are of great help in evaluating renewable energy projects. EXIM is a relatively small organisation of 400 employees supporting, on average $20 billion in US exports annually. Within these 400 there is a very small group of engineers, each specialised in a particular sector. When a project has extensive technical and environmental risks, we turn to internationally recognised engineering consultants for their support. As well as their expertise and resources, we also value their independence and reputation.

In addition to working in sectors that I believe contribute to humanity’s stewardship of the planet, I relish the constant variety, challenge and collaboration that my work involves. Otherwise, if every project were equal, my colleagues at EXIM and I could simply be replaced by ATM machines.