San Diego, Calif. — Financing of renewable energy, energy efficiency and other technologies to reduce America’s carbon footprint is a huge challenge for companies, public utilities and governments worldwide. Climate Change Business Journal (CCBJ) has revealed some bright spots and innovative developments in the investment landscape.
“Private equity investment - the real engine of innovation in clean technology-is steeply down, stock market performance since 2008 as measured by clean energy indices is not very encouraging, and project finance for renewable energy is moving slowly,” said Senior Editor Jim Hight in CCBJ’s newly published edition on Financing in the Climate Change Industry.
“Our research has also identified positive trends in energy efficiency financing, an uptick in strategic corporate investments, and new models for public-private infrastructure,” Hight added.
Strategic investment gains momentum
Private equity investment in clean energy technology has declined by close to 30% worldwide, according industry analysts interviewed by CCBJ. Venture capital groups have become disenchanted with poor returns and daunted by the capital-intensive needs of technology for renewable energy, energy efficiency, energy storage and other climate change industry segments.
This decline is tempered by a rise in strategic investments in the clean energy sector by multinational corporations like Daimler, IBM, Saudi Aramco, Shell, Total, Siemens, Toyota and Waste Management. “Unlike generalist VCs, some of which regarded alternative energy technology as just another IT category, multinationals have the balance sheets and the vision to see new technologies through to commercialization,” said Hight. “For them, resource efficiency and the imperative to reduce their greenhouse gas emissions are very real, bottom-line issues.”
Energy efficiency and renewables benefit from new business models
Energy efficiency markets in particular are benefiting from new players with innovative business models that bring power purchase agreements (PPAs), solar leasing, efficiency service agreements (ESAs), managed energy service agreements (MESAs), performance contracts and property-assessed clean energy (PACE) financing to a broad range of end-use consumers.
They include solar-as-a-service companies such as SolarCity and SunRun, independent solar finance outfit Clean Power Finance, and OPower, which markets energy efficiency to consumers on behalf of utilities.
Green infrastructure investment role for private firms
With an estimated $3.6 trillion in infrastructure funding needed in the United States by 2020 and traditional funding sources falling short, an emerging class of green infrastructure investment will be more important than ever—especially as local governments face the need to make infrastructure more resilient to extreme weather. Joint ventures between design and engineering firms and infrastructure investment funds are striking innovative public-private partnerships with government entities to meet these challenges.
CH2M HILL, for example, recently established Green Path Partners, a venture with EKO Asset Management, to promote and develop sustainable, green infrastructure that mitigates and is adaptive to climate change impacts. In April 2013, AECOM announced that it is creating its own $150 million fund, AECOM Global Fund I, L.P., “to make direct investments in real estate and public-private projects” as part of its larger AECOM Capital investment arm.
Inside the CCBJ finance edition
Finance in the Climate Change Industry looks at trends in renewable energy project financing, venture and corporate investing, carbon finance, government programs, public-private partnerships & performance-based infrastructure, and solar as a service business model. It includes interviews with senior climate change industry executives, in addition to Q&As with experts in project and structured financing.
Purchase CCBJ’s Finance Edition (20,000 words, 12 charts, 60 companies) for $250