The Renewable Energy Money Train: Mainstream Investors Can Climb On Board (#CleanTechnica Interview)

May 14th, 2018 by Tina Casey

The US may have withdrawn from the Paris Agreement on climate change, but the investment community sure didn’t get the memo. A new report describes how renewable energy is meeting the basic, bottom line requirements of risk-averse investing — meaning big pension funds and top dollar stuff like that. That means big bucks are coming down the pipeline to accelerate the clean power transition.

That’s more bad news for coal, which is already being pushed out of the picture.

Renewable Energy Goes Mainstream

The new clean power report comes from Ceres, a nonprofit that works with investors and other stakeholders in the sustainability and socially responsible areas.

Before we get int the meat of the report, let’s pause to note that the clean power/socially responsible investment field was pretty much a niche market until recently. In other words, talking to socially responsible investors about clean power was basically preaching to the choir.

So, it’s a big deal that mainstream firms and top dollar players like pension funds are getting serious about renewable energy.

For some insights on that trend, last week CleanTechnica reached out to Sue Reid, a co-author of the new report and Ceres’s Vice President of Climate and Energy.

How Are Investors Responding To Clean Energy Opportunities?

CleanTechnica just had one basic question for Reid: how are investors responding to the new report? Following is her commentary (phone interview lightly edited for clarity and flow, with breaks added):

Socially responsible investors have historically been very involved in this [clean power] space. Some of the bigger asset owners are new but are looking for opportunities that meet their needs. We hope and expect this will play out over time.

Part of what the bigger asset owners are recognizing is the need to synthesize changes in the landscape.

The issue is straight up cost competitiveness. The transition is under way and it’s irreversible, so there’s no question this is an opportunity.

So now the question is how do you find the right vehicles, finding what’s on the immediate horizon including energy storage and distributed energy.

One standout example of the new investor attitude occurred just last week, when Wells Fargo announced a new $200 billion sustainable financing fund. With that in mind, CleanTechnica also asked what happened to change how risk-averse investors view renewable energy:

These aren’t bad old days of Cape Wind. These projects are now predictable. There is a dramatically de-risked environment [note: the US offshore wind sector could be a case in point].

We also asked about energy storage:

Energy storage is a very dynamic space. It’s not in the same place yet as wind and solar but is on similar cost curve trajectory. Energy storage is also getting on a similar policy trajectory in terms of mandates for renewables with storage. Long term predictable storage is not as pervasive yet, but it’s the path we’re on.

As for preaching to the choir, Reid emphasized that the renewable energy message is now reaching a new audience:

The new group of investors recognize that clean power is consistent with basic investment fundamentals, where you don’t have a tremendous amount of latitude. They’re not necessarily looking for clean energy, they’re looking for sound investments and renewables fit the bill.

It comes down to the basic cost dynamics. It’s unfortunate in terms of the clean energy transition that there is uncertainty regarding federal policy and shifts in public opinion, but investment fundamentals are buffered from all of that because the economics are stable.

There is interest across all stakeholders, though you can’t generalize. Big pension funds, socially responsible investors, banks, and venture capitalists all have different risk tolerances.

Some companies see economic and resilience benefits. For example, food and beverage companies really get it in a big way to be part of the solution and minimize their impacts.

A lot of those companies also see reputational benefits, but economics are still the central driver.

What’s Inside The New Clean Trillion Report

For all the facts and figures behind Reid’s commentary, check out the new report under the title, “In Sight of the Clean Trillion: Update on an Expanding Landscape of Investor Opportunities.”

Ceres launched the “Clean Trillion” campaign in 2014 to foster the $1 trillion needed in additional spending per year through 2050, to decarbonize the global economy and limit warming to 2 degrees Celsius or less.

Quite a bit has changed in just the four years since the campaign was launched.

The most significant development is that the cost of wind and solar has dropped off the cliff, while the technology has improved and scaled up. Here’s a blurb from the report:

Energy market dynamics have shifted in favor of clean energy such as wind and solar, which increasingly out-compete new fossil fuel and nuclear power sources, and the advanced and clean energy market has surpassed US$ 1.4 trillion globally…

Ceres makes the case that investors need to understand that this newly diversified landscape is peppered with new opportunities:

…Such opportunities include investment in clean energy infrastructure (such as wind and solar projects) which can deliver stable, long-term, bond-like cash returns and a predictable stream of cash flows; storage infrastructure and technology, one of the highest growth areas; and early stage digital energy technology with risk-return profiles that can mirror those of venture capital investment.

The bottom line really is the bottom line. Today’s clean energy fans don’t necessarily have to be on board with climate science, and the report underscores that trend:

Environmental and climate goals, previously seen as the primary drivers for low carbon investment, have been eclipsed by the growing diversity of investment opportunities that match investors’ risk-return requirements as the clean energy market has become increasingly competitive, matures and grows.

On the other hand, carbon awareness can help inform investors’ risk analysis and accelerate decarbonization. The report emphasizes that “most investment consultants have been slow to incorporate climate-related considerations as standard across their client base, and many among this influential cohort still need to update their risk profiles related to low-carbon opportunities.”

Tariff? What Tariff?

Speaking of risk aversion, the US solar industry went into wait-and-see mode last year, when President* Trump began dropping hints that he would impose a 30% tariff on solar panels imported to the US.

The tariff went into effect last February, with many energy stakeholders predicting a loss of thousands of US solar jobs. However, the picture is complicated because the number of solar jobs in 2018 is actually on track to meet or beat the record breaking year of 2016.

Another factor is state-level policy, which has the potential to make or break solar growth on a local level regardless of the new tariff.

Then there’s the flurry of 50 or so solar tariff exemption requests, which are still under consideration by the Trump Administration.

To top it off, lawmakers in Trump’s own political party are shaking the exemption tree. In the latest development on that score, Bloomberg reports that a group of eight Republican US senators from five different states are requesting an exemption for the larger solar panels used in utility-scale arrays.

The solar tariff may come and go (it will in fact wind down in four years), but US investors and their legislative allies are still casting a favorable eye on renewable energy. The new Ceres report could help make the economic case for accelerating the trend, Trump or no Trump.

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*As of this writing.

Image (screenshot): Ceres via YouTube.









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