Here’s the No. 1 Problem With Renewable Energy Financing

May 17, 2016, 6:29 PM UTC

Predicting growth in the renewable energy sector can be problematic. With continuous stops and starts from a policy perspective, and the unpredictable pace of technological advancement, it’s hard for financiers to know how—or when—their investments will pan out.

“First off the most important thing in the capital markets is a level of certainty,” Chris Buddin, head of Goldman Sachs’ clean technology and renewables group, said at Fortune’s Brainstorm E energy conference on Tuesday.

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“When there are peaks and valleys of when we think there’s going to be credits or subsidies or incentives, you can’t make long-term decisions” Buddin told the audience in Carlsbad, Calif. He mentioned the investment tax credit passed by Congress at the end of last year as an example of this kind of unpredictability. The program, which passed just as an earlier version was set to sunset, gives solar companies a 30% tax credit on the price of solar installations for another five years.

“The extension was super positive. It gives you a runway to understand what’s going to happen,” Buddin said. “But if it becomes intermittent policy, it becomes very hard for the financial community to get comfortable modeling out the opportunities.”

Buddin spoke on a panel—”The Energy Path to 2030″—along with Chris Brown, president of Vestas-American Wind Technology; and Dan Reicher, executive director of the Steyer-Taylor Center for Energy Policy and Finance at Stanford University. Scott Jacobs, co-founder and CEO of Generate Capital, a company that finances clean tech projects, led the session.

While the policy arena can be mercurial and cause headaches, financiers may have an easier time forecasting the other variable: technology gains. Yet there is uncertainty there as well.

“One thing I am certain about is that the price of solar and the price of storage is going to decline,” Buddin said. “I just don’t know what slope is.”