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Wanting to erase their carbon footprints, or even just their electricity bills, homeowners are lining up to lease rooftop solar panels from Philadephia-based Urban Eco Electric. But despite growing customer interest in the company, investors are still watching from the sidelines.

“I’ve been using my own money,” said David Blumenfeld, CEO of Urban Eco Electric. “When the banks stopped lending, private individuals followed suit. I think everyone’s a little nervous.”

Blumenfeld isn’t the only one feeling the pinch of the recession’s credit crunch. Despite the Obama administration's spotlight on renewables and $54 billion in clean energy incentives packaged into the American Recovery and Reinvestment Act, startup renewable energy companies are struggling to get new projects off the ground.

Jeff Dalebroux, a Chicago-based finance attorney who works with infrastructure and project finance at Dykema Gossett PLLC, said the problem stems from a host of issues.

“Early stage renewable energy companies are having difficulty raising capital in the form of equity or debt,” Dalebroux said. “While the stimulus package seeks to promote investment in such companies, there has yet to be a significant on-the-ground impact.”

Even established renewable energy companies, such as Spain-based Iberdrola Renewables Inc., which has built wind farms in Illinois, have had to make concessions to deal with the tightening credit market.

“No doubt we’re in the middle of a credit crunch,” said Jan Johnson, communications director at Iberdrola Renewables' North American division. “Iberdrola has had to grow more selective. We have to have a flexible business plan.”

In 2008, Johnson said, Iberdrola Renewables added 1,400 megawatts of wind power to the electric grid in the U.S. In 2009, Iberdrola will only be able to bring about 544 megawatts of wind power online.

Johnson said Iberdrola was optimistic that stimulus funds would give the company a boost.

Unfortunately, the first round of those stimulus funds won’t be distributed until the end of 2009 at the earliest, according to Gordon Ho, partner at San Francisco-based Cooley Godward Kronish LLP and head of the firm’s green technology group. Ho has helped renewable companies in the past apply for government funding.

“I’m sort of optimistic that decisions are going to proceed in a short window,” Ho said. “This is not a lobbying effort, this is a financing effort. There’s going to be an incentive for the Department of Energy to get the money out quickly, but to also spend it on the right companies.”

Ho said the DOE was looking for renewable energy applicants with technology ready to be deployed and monetary support from private investors. The government aid is intended to be an addition to private equity, not necessarily the primary means of funding.

This private-public financing mix will work well for companies like Chicago’s Invenergy LLC, which has managed to find an investor. On April 2, Invenergy announced that it would be one of the first companies to take advantage of President Obama’s plan by developing a wind project in LaSalle County, an expansion of the company’s Grand Ridge Energy Center.

Joe Link, vice president of business development for Invenergy’s central U.S. projects, said finding capital for this expansion was challenging.

“It’s really difficult to get financing, even when you have a good project,” Link said. “Things are better than they were last fall, but it’s still hard.”

According to Dennis White, vice president of corporate contributions and community relations at Metropolitan Life Insurance Co., which has financed some of Invenergy’s recent projects, MetLife was willing to finance Invenergy due to the tax incentives offered for investment in renewable energy.

“In the second half of 2008, there were some attractive opportunities in the tax equity finance arena with the Invenergy transaction being one of them and we elected to invest,” White said.

Not all companies have been as fortunate as Invenergy. On top of the wait for stimulus funds and the credit crunch, many renewable energy companies are finding that investors are less interested in renewables since crude oil prices peaked in July 2008, said Dalebroux.

“The whole notion of energy financing - everyone talks about it, but it still needs to be driven by the economics,” Dalebroux said. “Now that the price of gas is down again, people struggle with the issue of what is really a competitive alternative.”

Investors are also reluctant to lend money because renewable energy technology is new and mostly unproven. Even without the credit crisis, he said, renewable energy companies would still face cautious investors.

While many renewable energy companies are desperate for equity, companies on the other end of the carbon-reduction spectrum, like energy efficiency companies that sell services or products that lower energy consumption, are in better shape.

Last December, Marc Porat, chairman of Serious Materials Inc., a Sunnyvale, Cal.-based company that develops and supplies materials for sustainable buildings, decided to buy out Chicago’s bankrupt Republic Windows and Doors Inc. manufacturing plant and revamp it to produce energy efficient windows.

Porat said financing for the project was primarily internal, but to go commercial, he’s looking for lenders to finance 15 total plants built around the country.

Porat said this is the hardest time he’s had finding investors since he began working in the industry in 1983.

Still, he said, energy efficiency companies are having less trouble than renewable energy companies. While there are over a hundred renewable energy companies, Porat said, there are fewer energy efficiency companies, and it costs less to get an energy efficiency company up and running than a renewable energy company.

The impact of the credit crunch on renewable energy has led some politicians to rally for a longer-term solution. On March 24, Rep. Chris Van Hollen of Maryland introduced the Green Bank Act of 2009 as a means of financing clean energy and energy efficiency projects.

The Green Bank would have $500 billion to loan out to renewable generation and infrastructure and would ensure that renewable energy’s future would not depend on the state of the markets, according to Todd Filsinger, co-chairman of the Green Bank Coalition.

“It gets projects moving on a consistent basis,” Filsinger said. “It will have a monumental impact and it will assist in achieving the goals set by the administration.”

If the Green Bank Act is passed, the coalition anticipates that the Green Bank’s lower interest costs and optimum leverage would cut 20 percent to 30 percent of financing costs and could accelerate clean energy development to meet President Obama’s goal of cutting U.S. carbon emissions by 80 percent by 2050.

A Green Bank would help renewable energy companies constantly keep projects rolling, but in the short-term environment, these companies will have to continue to scrounge for capital.

With his solar panels ready to be rented and installed, Urban Eco Electric CEO Blumenfeld said he didn’t think lending would take off for a couple more months. Investors are interested in his project, which would save homeowners 50 percent of their monthly electricity bill, but are wary to lend him money yet.

“I’m getting lots of reasons,” Blumenfeld said. “A lot are saying [they want] to go see if it works first.”