President-elect Barack Obama may dismiss notions of a New New Deal to stave off a Great Depression 2.0, but signs of a Rooseveltian shift in thinking abound.

Case in point: This week, Deutsche Bank called for the establishment of a “national infrastructure bank” to create “green” jobs, fight global warming and ensure U.S.  energy independence by investing in an array of projects - from energy efficiency to upgrading the Eisenhower-era power grid to large-scale renewable energy power plants.

The idea of a national infrastructure bank is not new - versions have been proposed by Obama and Senators Chris Dodd (D-Conn.) and Chuck Hagel (R-Neb.) to finance the repair of the nation’s crumbling highways, water systems and cities. Deutsche’s twist is to give such an institution a green mission.

“We believe this confluence opens up an historic opportunity for a new U.S. administration and Congress to take a global leadership position on the issue of the environment and energy security, while addressing current financial problems,”  wrote Deutsche Bank’s Climate Change Investment Research team in its report.

“We’re calling for the national infrastructure bank to go green because in the long run it will save us money and create more jobs,” Deutsche senior investment analyst Bruce Kahn told Green Wombat.

He says Deutsche Bank is not putting a dollar figure on the capitalization of such bank, but the report notes others have suggested a $100 billion investment would generate two million green jobs.

Deutsche Bank (DB) recommends a green infrastructure bank focus on energy efficiency, the transmission grid, renewable energy and public transportation. The green bank would dispense federal funding, make grants to states and cities, issue loans to governments and companies, underwrite public and private bonds, and provide tax credits for public and private projects.

In Deutsche Bank’s analysis, the biggest bang for the buck would come from a massive retrofit program to increase the energy efficiency of the nation’s commercial buildings and make sure the 1.8 million new homes constructed every year are green. Buildings consume as much as 50% of the electricity generated in urban areas and emit about 20% of the country’s greenhouse gases. The work of installing energy-efficient heating, lighting and air conditioning systems is labor intensive and would spike demand for green building materials.

Upgrading and digitizing the power grid to create a “transmission super highway” to bring solar and wind energy from the deserts and Great Plains to the cities could generate as many as 500,000 jobs, according to an estimate by the American Wind Energy Association. The price tag to modernize the grid: $450 billion over the next 15 years by New Energy Finance’s estimate.

One area given short shrift by the Deutsche report is how a green infrastructure bank would support large-scale renewable energy power plants. Wind farms and solar power stations typically require billions of dollars in financing to get built and rely on investors buying the tax credits the projects generate. Those investors have been in short supply thanks to the credit crunch and the collapse of the Wall Street banks that often put up the cash for such deals.

“Everyone’s lost money, there’s no tax equity to be had,”  says Kahn. “But we expect that tax credit equity investors will return to the market, not next month, but in the next couple of years.” Kahn says an infrastructure bank could support green energy power plant projects through loans and loan guarantees.

A green bank would also be good business for Deutsche Bank.

“We have large number of investments at stake, current investments in all these sectors,” says Kahn. “It provides an investment opportunity as this infrastructure bank would not be able to exist all on its own. It would need private capital to invest alongside it.”

photo: California Governor’s Office

California Governor Arnold Schwarzenegger on Monday terminated talk that the recession will crimp California’s fight against global warming when he ordered every utility in the state to obtain a third of its electricity from renewable sources by 2020. And in a move that will shake up the land rush to build solar power plants in the desert, Schwarzenegger signed an executive order to streamline and prioritize the licensing of such projects.

“One of the great things about California, of course, is that we always push the envelope,” said Schwarzenegger at startup OptiSolar’s solar cell factory in Sacramento, surrounded by a triptych of solar panels, utility executives and environmentalists. “That is why today I’m proposing that we set our sights even higher. This will be the most aggressive target in the nation.”

California currently requires the state’s Big Three investor-owned utilities - PG&E (PCG), Southern California Edison (EIX) and San Diego Gas & Electric (SRE) - to secure 20% of their electricity from green energy sources like wind, solar and geothermal by 2010. Monday’s move turns what had been a 33% renewables goal into a mandate and extends responsibility for meeting it to every electricity retailer in California.

Utilities, however, have struggled to reach even the 20% target as renewable energy projects become bogged down in California’s extensive environmental review and licensing process that involves a host of state and federal agencies.

Many proposed massive megawatt solar power plants will be built on environmentally sensitive land in the Mojave and Colorado deserts in California, threatening to trigger years-long battles over endangered species and water.

Take, for instance, the Ivanpah Solar Electric Generating System, 400-megawatt solar thermal power plant  to be built by Bay Area startup BrightSource Energy on U.S. Bureau of Land Management property. BrightSource, which has a 20-year contract to sell the power plant’s electricity to PG&E, is dealing with the California Energy Commission, the California Department of Fish and Game, the BLM and the U.S. Fish and Wildlife Service as well as the agencies that control access to the transmission grid.

Then there’s environmental fights over extending power lines to connect such projects to coastal metropolises. Late last month, state regulators rejected San Diego Gas & Electric’s plan to build $1.3 billion transmission line called the Sunrise Powerlink due to the environmental impact of routing it through sensitive desert lands.  A final decision on the project to bring green energy from the Imperial Valley to coastal metropolises will be made next month.

Schwarzenegger’s executive order requires various state agencies to collaborate to create a one-stop shopping permit process to cut in half the time it takes to license a renewable energy project - which now can be a two-year slog. The U.S. Fish and Wildlife Service and BLM also agreed to participate in a Renewable Energy Action Team to expedite the licensing of solar power plants and other green energy projects.

“We will streamline the permitting process and the siting of new plants and transmission lines,” Schwarzenegger said. “We will complete the environmental work up front, dramatically reducing the time and the uncertainty normally associated with any of those projects.”

By March 1, the action team will identify and prioritize those areas of the desert that should be developed first for renewable energy projects based on environmental impacts and access to transmission. The group will also work with another task force that is identifying where power lines should be extended into the desert.

That will affect the fortunes of dozens of solar startups, financiers and speculators — everyone from Goldman Sachs (GS) to Chevron (CVX) — that have filed lease claims on nearly a million areas of desert land that the BLM is opening up for solar power plants. Those with land claims in areas at the top of the list for renewable energy development will find it easier to obtain financing - currently in short supply - to build billion-dollar projects. Those at the bottom of the list may rue the six-figure application fees they paid to stake claims on thousands of acres of desert land.

Behind the optimistic talk and smiles at Monday’s press conference, utility execs and environmentalists who praised the governor’s latest green initiative also signaled that political fights over how to achieve the state’ ambitious renewable energy goals are not over.

“Transmission is absolutely critical to get those renewables from the Imperial Valley,” San Diego Gas & Electric CEO Deborah Reed told the audience. “Assuming a positive decision on Sunrise Powerlink next month, we’ll get to 33% by 2020.”

But when the Nature Conservancy’s Rebecca Shaw took the microphone, she offered a cautionary note. “In our urgency to create a more sustainable future, we must be careful not to destroy the very environment that we are trying to protect,” said Shaw, associate state director for the environmental group.

California’s aggressive renewable energy policies already have had one desired consequence: spurring the creation of green collar jobs. OptiSolar, which earlier this year signed a long-term contract to supply PG&E with 550 megawatts of electricity from a massive photovoltaic solar farm, employs 500 people at its Bay Area headquarters and factory. CEO Randy Goldstein said his company will hire another 1,000 for its new Sacramento factory.

The wind, solar and geothermal industries have wasted no time pressing the incoming Obama administration to implement an alternative energy agenda to spur investment and create jobs.

During a conference call Thursday, the leaders of the Solar Energy Industries Association, American Wind Energy Association and other trade groups lobbied for a plethora of legislation and policy initiatives. None of these proposals are new, but given Barack Obama’s campaign promises to promote alternative energy and the strengthened Democratic majority in Congress, the industry has the best chance in many years of seeing this wish list made real.

• A five-year extension of the production tax credit for the wind industry (it currently has to be renewed every year) to remove uncertainty for investors.
• A major infrastructure program to upgrade the transmission grid so wind, solar and geothermal energy can be transmitted from the remote areas where it is produced to major cities. Obama advisor Eric Schmidt, CEO of Google (GOOG), recently joined with General Electric (GE) chief Jeff Immelt to launch a joint initiative to develop such smart grid technology as well as push for policy changes in Washington to allow the widespread deployment of renewable energy by rebuilding the nation’s transmission system.
• Impose a national “renewable portfolio standard” that would mandate that utilities obtain a minimum 10% of their electricity from green sources by 2012 and at least 25% by 2020. Two-thirds of the states currently impose variations of such requirements.
• Mandate that the federal government - the nation’s single largest consumer of electricity - obtain more energy from renewable sources.
• Enact a cap-and-trade carbon market.

“If the administration and Congress can quickly implement these policies, renewable energy growth will help turn around the economic decline while at the same time addressing some of our most pressing national security and environmental problems,” the green energy trade groups said in a joint statement.

No doubt those measures are crucial to spurring development of renewable energy and creating green collar jobs. But the major obstacle confronting the alt energy industry right now is the credit crunch that is choking off financing for big wind and solar projects and scaring away investors from more cutting-edge but potentially promising green technologies.

A focus by President Obama and Congress on restoring confidence in the financial system will most likely do the most for green investment as well as restore luster to battered renewable energy stocks like First Solar (FSLR), SunPower (SPWRA) and Suntech (STP).

Photo: Todd Woody

The land rush to stake prime sites in the Mojave Desert for solar power plants has moved east from California to a state that knows a thing or two about desert dreaming and scheming — Nevada.

When Green Wombat’s story on the solar land rush was published in the July 21 issue of Fortune (see “The Southwest desert’s real estate boom”), solar energy developers, financiers and speculators had filed lease claims on 226,000 acres of federal land in Nevada. Today, 702,000 acres are in play, largely thanks to Goldman Sachs’ aggressive moves to lock up land. The New York investment giant has put claims on about 300,000 acres of Bureau of Land Management dirt in the Silver State – in one week alone, it filed claims on some 187,000 acres.

Given its financial firepower, Goldman’s designs on the desert have been a matter of intense interest. (The firm also has filed claims on 125,000 acres in California.) Goldman (GS) declined to discuss its solar strategy, but a review of BLM documents and interviews with green energy executives sheds some light on its power plans as the financial crisis triggers a shakeout in the solar land rush.

Over the past two years, scores of companies — from Silicon Valley startups to Chevron (CVX) to utility FPL (FPL) — have scrambled to put lease claims on the nation’s best solar real estate to build massive megawatt solar power plants. In California, where utilities face a state mandate to obtain 20% of their electricity from renewable sources by 2010 with a 33% target by 2020, claims have been filed on nearly 1 million acres. If all those solar stations were built, they would generate a staggering 60,000 megawatts of electricity, or nearly twice the power that California currently consumes.

With most of the prime solar hot spots taken in California, the action is moving to sun-drenched states like Nevada where there’s plenty of wide-open desert land. The BLM has yet to issue any leases and is currently evaluating the applications on a first come, served basis. A key consideration: whether the applicant can deploy a viable solar technology.

But with the credit crunch threatening to derail many of those projects, companies are jockeying to score the best sites - those near transmission lines and water - when the weak are weeded out by a failure to obtain financing or a proven solar technology. Some sites have two or three companies queued up in case the first company in line falters.

For its part, Goldman Sachs has brought in its Cogentrix Energy subsidiary to develop its solar projects, according to BLM records.  Cogentrix is a Charlotte, N.C.-based owner and operator of coal and natural gas-fired power plants that Goldman acquired for $2.4 billion in 2003.

“Cogentrix doesn’t have a solar technology,” says Rob Morgan, executive vice president and chief development officer for Silicon Valley solar startup Ausra. He says Ausra, which is building a solar power plant for utility PG&E and itself has staked claims in Arizona and Nevada, has held discussions with Goldman about its solar technology.

European renewable energy companies are also taking advantage of the market turmoil. State and federal records show that Iberdrola Renewables, a spinoff of Spanish energy giant Iberdrola, has quietly acquired a year-old Henderson, Nev., startup called Pacific Solar Investments — and its claims on about 180,000 acres of desert land in Arizona, California and Nevada. Iberdrola Renewables is the world’s largest wind developer.

The saga of Pacific Solar shows how cutthroat the competition for solar real estate has become. Just ask Avi Brenmiller, CEO of Israeli solar power plant company Solel, which last year inked a 553-megawatt deal with PG&E (PCG). Brenmiller now finds himself up against his former COO, David Saul, who set up Pacific Solar and began filing land claims while still working for Solel, according to BLM  records and Brenmiller. During this time, Saul also was making land claims on behalf of a second solar company, IDIT, where he serves as CEO, according to filings with the Arizona Secretary of State’s office.

Five days after leaving Solel in August 2007, Saul filed a claim on a California site, getting second in line behind Goldman but beating his former employer to the punch by a week. Solel is now behind Pacific Solar and IDIT on two other sites. “So he’s now a competitor in the land rush, which is one of the problems we face,” Brenmiller told me ruefully when we met in San Francisco earlier this year.

Saul did not respond to requests for comment. Iberdrola Renewables also did not return requests for comment.

French energy company EDF’s U.S. subsidiary, enXco, meanwhile has been joined in the land rush by Portuguese utility company EDP and Germany’s Solar Millennium. Spanish renewable energy heavyweight Acciona’s name doesn’t appear on any land claims. But the CEO of Acciona’s U.S. solar operations, Dan Kabel, started a company called Bull Frog Green Energy that has filed claims on 56,000 acres in California and Nevada. Kabel did not respond to a request for comment.

Other new players in the desert solar game include U.S. energy giant Sempra (SRE), which wants to lease 11,000 acres in California’s Imperial County for a 500-megawatt photovoltaic power plant. That could be good news for solar cell maker First Solar (FSLR), which is currently building a smaller solar power plant for Sempra in Nevada. Johnson Controls (JCI), the Fortune 100 automotive and power systems conglomerate, has put in a solar land claim in Nevada. Even former hotel magnate Barry Sternlicht, founder of Starwood Hotels & Resorts, wants a piece of the action through his Starwood Energy Group, which has filed claims in Arizona and Nevada to build solar power plants.

SolarReserve, a Santa Monica, Calif-based solar startup backed by Citigroup and Credit Suisse, has BLM land claims in California and Nevada and is also negotiating with smaller companies that staked claims on prime solar power plants with access to the transmission grid.

“We have done deals with three or four applicants in the BLM queue,” SolarReserve chief operating officer Kevin Smith tells Green Wombat. “The smaller companies with land claims are typically speculators who don’t have their own technology.”

Industry insiders say a shakeout in the land rush is inevitable, given the credit crunch and too many companies in the chase for the best solar power plant sites.

“A drawn-out financial crisis will reshape the renewable sector, most likely forcing a wave of consolidation,” says Reese Tisdale, research director for Emerging Energy Research, a Cambridge, Mass., consultant. “If someone holds land and someone holds a technology, maybe there’s a deal out there.”

That’s Ausra’s thinking. With the financial crisis putting the billions of dollars needed to build big solar projects out of reach, the company is repositioning itself as a supplier of solar technology as well as a builder of solar power plants.

“We see our future as being a technology provider,” says Ausra’s Morgan, who says the company has had discussions with various power plant developers. “And hopefully a lot of these developers in the BLM queue will use Ausra technology.”

Even in the depths of the downturn, Silicon Valley keeps the tech faith, and these days that faith has a green sheen. So while the news is full of layoffs and cutbacks — even at companies like electric car maker Tesla Motors — the California Clean Tech Open competition Thursday night was handing out $600,000 to a half-dozen startups that hope to be the green tech titans of the future.  For instance, GreenVolts, a 2006 winner, is now building a solar power plant for utility PG&E.

The Clean Tech Open held its first bake-off in the more economically optimistic times of 2006 but bleak days doesn’t appear to have cooled the competition. This year 43 finalists vied for “start-up in a box” packages that include $50,000 in cash and $50,000 worth of business services. The contest is backed by a who’s who of Silicon Valley tech firms (Google (GOOG), Advanced Micro Devices (AMD) ), utilities (PG&E (PCG), Southern California Edison (EIX), San Diego Gas & Electric (SRE) ) and government energy labs. Venture capitalists and other business leaders serve as judges.

Here then are six startups that the judges think point the way to the future:

• Viridis Earth of San Jose, Calif., has developed a product to retrofit air conditioners to reduce their electricity consumption by 20%.
• Focal Point Energy, also of San Jose, is developing industrial solar hot water and steam generation systems.
• ElectraDrive of San Francisco retrofits gasoline-powered cars to run on electricity.
• BottleStone will produce a substitute for stone and concrete building materials that is 80% recycled glass. The Los Altos Hills, Calif., company claims its production process cuts greenhouse gas emissions by 42% .
• Power Assure of Santa Clara, Calif., is developing energy efficiency management software for power-hogging data centers.
• Over the Moon Diapers, another San Francisco startup, makes environmentally friendly diapers.

Image: Cool Earth

LIVERMORE, Calif. - It sounds like something out of one of those do-it-your-self magazines: Stitch together two buck’s worth of thin-film plastic - the stuff potato chip bags are made of - stick in a photovoltaic cell, inflate with air and, voilà, you’ve got yourself a “solar balloon” that will generate a kilowatt of electricity. String together 10,000 balloons and you’ve got a solar power plant that can power a town.

California startup Cool Earth Solar believes this high-low tech approach is what will make its solar power plants competitive with fossil fuels. Green Wombat visited Cool Earth’s Livermore headquarters recently for a Fortune Magazine story and got a look at the technology.  “We wanted to do solar in a very different way,” says Cool Earth CEO Rob Lamkin.

Different it is. We’re standing in Cool Earth’s back shop in front of an eight-foot-high solar balloon. Two pounds of plastic are pumped with a third of a pound of air per square inch to make the balloon taut. The curved top two-thirds of the balloon is transparent and the bottom is made of the silvery reflective plastic you’d find lining a bag of junk food. A steel strut inside will hold a tiny but highly efficient solar cell, which is the most high-tech component of the balloon.

Here’s the ingenious part of the technology, developed by scientists at Caltech: Instead of using expensive optics to concentrate sunlight on the solar cell, Cool Earth manipulates the air pressure inside the balloon to change the shape of the mirrored surface so that it focuses the maximum amount of sunlight on the solar cell, boosting electricity generation 300 to 400 times.

By replacing expensive materials like steel with cheap-as-chips plastic and air, Cool Earth aims to dramatically lower the price of solar electricity. “We strongly believe it’s all about cost,” says Lamkin, “not how clever the technology is or if it is 1% more efficient.”  For instance, the amount of aluminum in a can of Coke would provide enough reflective material for 750 balloons, he notes.

The company, founded in 2007, has raised $21 million so far. It plans to build solar power stations in the 10-megawatt to 30-megawatt range. Two to six balloons will be suspended on wood poles and anchored with cables about 10 feet off the ground. That means the earth won’t have to be graded, reducing the environmental impact of Cool Earth’s power plants - a growing issue given that most solar thermal power stations will be built in the desert, home to a plethora of protected wildlife. The relatively compact size of Cool Earth’s power stations also means they can be located close to existing transmission lines.

A prototype power plant is being built in a field across the street from Cool Earth’s offices and Lamkin says a 1.5 megawatt plant will be constructed early next year in the Central Valley town of Tracy. The electricity probably will be sold to utility PG&E (PCG) under a state renewable energy program.

Unlike big solar thermal plants, photovoltaic power stations do not need to obtain a license from the California Energy Commission, which can be an expensive two-year ordeal. Lamkin estimates that a Cool Earth power plant can be up and running in six months, which should appeal to utilities like PG&E, Southern California Edison (EIX) and San Diego Gas & Electric (SRE), which are under the gun to meet state mandates to obtain 20% of their electricity from renewable sources by 2010.

Now Cool Earth just needs to make the technology work in the field. It has yet to produce electricity from its balloons, as the solar cells are still being produced. Also unknown is how the balloons will operate in real-world conditions. Lamkin says they can withstand 125-mile-an-hour winds. They have a lifespan of just five years, but Cool Earth expects to replace the balloons every year, given their low cost.

“Our major structural element is air, which so far is free,” Lamkin says. “And the sun isn’t taxed either.”

Yet.

The risky nature of Big Solar projects has been driven home with California regulators’ move to kill a controversial $1.3 billion transmission line that would have connected massive solar power stations in the desert to coastal cities.

“These projects are unlikely to proceed,” wrote Jean Vieth, an administrative law judge with the California Public Utilities Commission, in a ruling rejecting San Diego Gas & Electric’s Sunrise Powerlink transmission line.

Phoenix-based Stirling Energy Systems in 2005 scored a contract to provide SDG&E (SRE) with up to 900 megawatts of electricity to be generated by as many as 36,000 solar dishes. A few months later, the utility filed an application to build the Sunrise Powerlink, a new transmission line to connect the Stirling power plants and other renewable energy projects to the coast.

But the utility’s proposal to build 150-foot-high transmission towers right through wilderness areas of Anza-Borrego State Park, home to a host of protected species, triggered a long-running fight with green groups that generated an 11,000-page environmental impact report. On Halloween, Vieth issued a ruling that found that despite state mandates to cut greenhouse gas emissions, the environmental impact of the transmission project was frightening.

“The potentially high economic costs to ratepayers and the potential implications for our [greenhouse gas] policy objectives do not justify the severe environmental damage that any of the transmission proposals would cause,” concluded Vieth in a 265-page decision.

The battle isn’t over — the public utilities commission will vote in December whether to accept the judge’s ruling. They will also consider an alternative decision issued by a commissioner assigned to review the case. That decision would let SDG&E build a transmission line along a different route under certain conditions.

But the case highlights the conflicting environmental values that will dog solar power projects. In other words, just what trade-offs are we willing to make to secure a planet-friendly source of energy? In this case, the judge ruled that to avoid the environmental damage of a massive new transmission line, the preferred alternative is to build more fossil-fuel plants close to San Diego along with a smaller-scale solar power station and a huge increase in rooftop solar arrays. The judge acknowledged that such an alternative “would cause substantially more GHG emissions than the proposed project and other transmission proposals.”

The judge’s second preferred alternative was to build only renewable-energy projects near San Diego that would not require big new transmission lines. Some Sunrise Powerlink opponents argue that San Diego has enough roof space to generative massive amounts of electricity from photovoltaic solar panels. (The cost of such an undertaking was left unsaid.)

Public Utilities Commissioner Dian Grueneich’s alternative decision would allow San Diego Gas & Electric to build Sunrise Powerlink along a more environmentally-benign route if the utility could prove that most of the transmission line would carry renewable energy so as to offset the 100,000 tons of greenhouse gases emitted during its construction. “Reliance on a single 900-megawatt contract (the Stirling Energy Systems contract) is too risky,” she wrote.

So where does this leave Stirling? COO Bruce Osborn didn’t immediately respond to a request for comment. But earlier this year, he told Green Wombat that even if Sunrise Powerlink was killed, there’s enough existing transmission capacity to carry electricity from the power plant’s first 300-megawatt phase. Stirling also has a 20-year contract to supply up to 850 megawatts of electricity to utility Southern California Edison (EIX), a deal not contingent on Sunrise Powerlink.

The economy may be all trick and no treat, but you wouldn’t know it from First Solar, one of the few public solar cell makers and thus a bellwether for the industry. This week the Tempe, Ariz.-based company reported solid third-quarter earnings and unveiled two deals that mark a big expansion in the U.S. market.

It agreed to supply solar installer SolarCity with 100 megawatts of thin-film modules and made a $25 million investment in the Silicon Valley startup - which represents a 10% stake, valuing SolarCity at $250 million. The other deal didn’t get much attention - it was buried in the earnings report - but is significant nonetheless. First Solar (FSLR) will team up with utility giant Edison International (EIX)’s power plant subsidiary, Edison Mission Energy, to develop large-scale solar power stations. (First Solar just completed a 2.4 megawatt project for Southern California Edison as part of the utility’s 250-megawatt commercial rooftop initiative and will finish by year’s end a 12-megawatt solar power plant in Nevada for Sempra (SRE).)

“By combining Mission’s extensive track record of power project development with First Solar’s low-cost systems and construction capability, we believe we’ve created a powerful engine for future growth in the U.S. utilities segment,” First Solar CEO Mike Ahearn said during the company’s earnings call Wednesday, according to a transcript published by the Seeking Alpha business blog.

But it was Ahearn’s comments on the European market - 85% of First Solar’s business is in Germany, for instance - that is of most interest to investors.

While he predicts the European market will remain strong - First Solar expects its 2009 net sales to range from $2 billion to $2.1 billion, up from $1.22 to $1.24 for 2008 - he did note some red flags, particularly for utility-scale solar power stations.

“Our review indicates that solar projects lending outside of Germany has essentially stopped for the time being,” Ahearn said. “Today, we have identified potential financial risk in our customer base that represent approximately 15% to 20% of our planned sales in Europe in 2009.”

“We believe most of our European customers outside of Germany have sufficient balance sheet strength to bridge any near-term projects delays,” he added.

During the Solar Power International conference in San Diego this month, there was much buzz that solar companies that had ramped up their production capacity over the past couple of years would be hit by an oversupply of solar modules just as customers get crunched by the credit crisis.

But Ahearn told analysts on Wednesday that First Solar’s thin-film modules - which are made by depositing solar cells on plates of glass and use minimal amounts of expensive silicon - would continue to sell for less than conventional cells and thus remain attractive to customers. “We therefore assume that any price competition is unlikely to have a sustained impact on First Solar,”  he said.

Despite First Solar’s moves into the U.S. market, Ahearn acknowledged the immediate future is uncertain. While Congress extended a key investment tax credit for eight years as part of the financial bailout package, investors have lost their appetite for tax equity partnerships that would buy those credits from solar companies in exchange for financing the construction of power plants.

“In the short-term, our review indicates that the traditional investors in tax equity - financial institutions - have largely stopped participating,” Ahearn said. “We assume some of these investors will return to the market in 2009, but the timing and future cost of this funding is difficult to predict. The possibility of more expensive tax equity and its impact on solar electricity prices for both new and pending projects remains a major uncertainty going into 2009.”

In a move that will bring thin-film solar panels to the U.S. residential market, First Solar has signed a deal to provide installer SolarCity with 100 megawatts’ worth of solar arrays over the next five years. First Solar is also investing $25 million into SolarCity, the Silicon Valley startup backed by Tesla Motors founder Elon Musk.

This is First Solar’s initial foray into the home market — and apparently the first of any thin-film solar module maker. Thin-film solar panels are made by depositing solar cells on sheets of glass or flexible material and use little of the expensive silicon that forms the heart of more bulky conventional solar modules. That makes thin-film panels cheaper, although they are less efficient at converting sunlight into electricity. And thin is in for homeowners who prefer less-obtrusive panels on their roofs.

SolarCity CEO Lyndon Rive told Green Wombat that First Solar’s more economical panels will allow the company to expand to the East Coast and other areas that do not heavily subsidize solar. SolarCity installs solar panels at no cost to the homeowner and then leases them back for a monthly charge. “What matters is not efficiency but cost per kilowatt-hour,” Rive says, noting that solar programs like California’s reduce rebates to panel makers as the number of installations increase. “We need solutions that address declining subsidies.”

Added SolarCity communications director Jonathan  Bass: “When we talk to customers their four biggest priorities are cost, cost, cost and aesthetics.”

Beginning in early 2009, SolarCity will start receiving 20 megawatts’ worth of First Solar panels a year. Rive won’t disclose how many megawatts SolarCity currently installs annually, but 20 megawatts would seem to represent a significant expansion of the startup’s operations. Over the past two years, SolarCity has installed solar arrays for 2,500 homes and small businesses and a spokeswoman says the First Solar deal would supply enough panels for about 5,000 homes a year.

The deal also marks a move to diversify on the part of Tempe-Ariz.-based First Solar (FSLR)  — known as the Google (GOOG) of solar for its once-stratospheric stock price. The company, backed by Wal-Mart’s (WMT) Walton family, had primarily focused on the overseas commercial rooftop market. This year though First Solar has signed deals to build thin-film solar power plants for utilities like Southern California Edison (EIX) and Sempra (SRE).

First Solar on Wednesday reported that third quarter revenues rose 30% to $348.7 million from the second quarter and was up 119% from the year-ago quarter. Profit spiked 42% to $99.3 million from the second quarter and increased nearly 116% from a year ago.

photo: Todd Woody

CEDAR RAPIDS, Iowa - For the past four years, the global wind industry has grown at a Google-like 30% clip as wind farm developers and turbine makers met demand for the one renewable energy source that has become competitive with fossil fuels. In the United States alone, new wind capacity will have jumped 50% in 2008.

Now the credit crunch is taking its toll – at least when it comes to forecasts for the industry’s prospects in 2009. Over the past week, analysts and industry insiders have ratcheted back growth predictions due to uncertainty over whether developers will be able to secure financing for the ever-bigger wind farms on the drawing boards.

“There is little visibility into the project finance market over the next 18 months,” wrote HSBC analysts Robert Clover, Charanjit Singh and James Magness in a report issued last week. “Thus far, company management in the wind sector continues to say that it is not experiencing a slowdown in growth, although developers say that finance is more expensive than it was. We do not believe that the long-term growth story has been undermined, but expect a period of reduced growth.”

The HSBC analysts predict the industry won’t grow at all next year. Meanwhile, the American Wind Energy Association, a Washington, D.C., trade group, also expects a slowdown in 2009.

“Clearly the market’s perception of growth for the wind industry has declined dramatically, but against a backdrop of virtually no industry data points,” the HSBC analysts acknowledged.

Ah, there’s the rub. Aside from the fear of the future that threatens to paralyze just about every industry, absent a complete collapse of capitalism the wind industry would seem poised to continue its run, albeit at a slower pace. (The nascent Big Solar business, in contrast, finds itself in a more precarious situation.)

In the U.S., state mandates that require utilities to obtain a growing percentage of electricity from renewable sources will drive growth for years into the future. That’s the reason you’re seeing plans for gigawatt-sized wind farms like the 4-gigawatt one T. Boone Pickens is building in Texas. As analysts were souring on the industry’s prospects last week, oil giant BP’s (BP) wind subsidiary finalized a deal with California turbine maker Clipper Windpower to build a five-gigawatt project - the world’s largest, sorry T. Boone - in South Dakota. (Of course, that’s little comfort to investors who have seen wind stocks take big hits in recent weeks. Nor is it good news for two U.S. startups that have filed for IPOs -  First Wind and Noble Environmental.)

The wind developers and turbine makers Green Wombat has talked to in recent weeks for an upcoming Fortune magazine story say the long-term impact of the financial crisis remains unknown at this point. A large pipeline of orders for windmills - Danish turbine king Vestas’ orders spiked 52% from the first quarter to the second, according to HSBC - suggests that growth will continue unless wind farm developers start canceling projects - something that hasn’t happened to date.

The wombat happened to be at Clipper’s Cedar Rapids, Iowa, turbine factory on Tuesday and put the question to Bob Gates, the Carpinteria, Calif.-based company’s vice president of operations. Clipper is only one of two U.S. turbine makers, the other being General Electric (GE). (GE acquired its turbine operations from a bankrupt Enron, which itself had bought the business in 1997 from Clipper’s founder.)

“I think growth will be flat next year and that may continue to 2010 and then go back up,” said Gates as workers assembed gigantic drive trains for Clipper’s 2.5-megawatt Liberty turbine. “You have to put in your order for some components a year in advance, so if demand drops in 2009 you’ll have fewer turbines to bring to market in 2010.”