Ormat Technologies, Inc. announced this week that it has signed a 20-year power purchase agreement (PPA) with NV Energy, Inc. for the purchase 30 megawatts (MW) from the McGinness Hills Geothermal project, which is currently under construction.

The PPA is subject to various approvals including the approval of the Public Utilities Commission of Nevada and is projected to come on line in 2012.

When completed, the McGinness Hills project will increase the total output supplied from Ormat to NV Energy, Inc. to approximately 135 MWs, helping NV Energy to meet its renewable energy requirement. Nevada’s renewable portfolio standard legislation requires 15 percent of all electricity generated in the state to be derived from new renewable energy sources by the end of 2012.

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Project finance within renewables – solar in particular – has made great progress over the past few years with the introduction of the solar PPA, and with financiers developing longer term operating data from which to base their financial models. Educated guesses are more educated and less of a guess, and big money has entered the space as the financial model has become more credible.

Enter the 2008 financial crisis. Surely, the world’s worst financial crisis (and tightest credit market) since the Great Depression will impact renewable energy project development, which is an inherently capital-intensive industry. The question is, who will it affect, and how badly? I think it’s too early to know for sure, but without a doubt, investors will likely demand higher returns for both debt and tax equity (a special form of equity designed to maximize use of tax credits) due to a general scarcity of capital. However, I don’t think funding will dry up, as solar projects boast a very different risk-return profile than do other investments given that government subsidies constitute a large slice of the project’s value and project cash flows aren’t particularly risky.

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