Renewable energy project financing and development is being challenged by regulatory uncertainty and historically depressed natural gas prices. This is probably not a surprise to industry participants and observers, but these were two predominant themes among the bankers, developers, lawyers and other participants at the 9th annual Renewable Energy Finance Forum Wall Street in New York on June 19th.

The situation is risky right now for investors, said Nicholas d’Arbeloff, President of Regional Development and National Programs for Advanced Energy Economy, an industry association. How heavily do you want to bet, given the current political uncertainty?

The federal production tax credit for the wind industry is set to expire at the end of 2012 and it is uncertain whether the incentive will be extended, making it difficult to take investment decisions on projects.

“Wind has been a low cost alternative [energy source] with the PTC,” said Jonathan Weisgall, Vice President for Legislative & Regulatory Affairs at MidAmerican Energy Holdings.

A major argument in favor of renewable energy is that it can ease the effects of commodity price volatility in a utility’s portfolio of power generation sources. “Renewables offer a 30-year fixed price, gas does not,” Weisgall said.

Regulatory volatility at the state level has also been a challenge for some renewable energy projects and regulations can vary widely from one state to another, Neil Auerbach, Founder and Managing Partner of Hudson Clean Energy told the audience. “Volatility is not good for development,” he said.

The regulatory variations between states can occasionally defy logic. It is easier to get renewable energy projects through the regulatory process in some western, red, coal states including Wyoming, than blue states like California or Oregon, said Weisgall.

Read “Wind Rush,” an Breaking Energy white paper that provides wind industry analysis and a deeper discussion of the PTC here.

Despite regulatory hurdles however, California and Oregon are the top two states in the Advanced Energy Economy’s Clean Energy Leadership Index 2012, an analysis of the clean energy marketplace.

Having a diverse, balanced energy portfolio is a common goal among utilities because it reduces supply and price risk associated with being overly reliant on any single power generation fuel. “This country has been good at having a diverse energy portfolio and [low] gas prices threaten this, Weisgall said.

Natural gas is the lowest greenhouse gas emitting fossil fuel, but it still contributes to climate change and given this fact, Weisgall pointed out that “gas could become the coal of tomorrow.”