Financing the Future Electric System


Michel Di Capua, Bloomberg New Energy Finance, Head of US Analysis

Stuart Bernstein, Goldman Sachs Head of Cleantech and Renewables

Bob Hemphill, AES Solar, JV between AES Corp and Riverstone Holdings

Jacob Susman, OwnEnergy

The one word you hear from investors is “consistency.” But there isn’t consistency in US policy for energy. Vinod Khosla wrote, “Policies do matter because they can encourage or discourage experimentation.” Take out risk or reduce cost so innovators can afford to take risk.

The overall uncertainty in cleantech raises the cost of capital. (Unlike most, Goldman Sachs funds cleantech companies from the GS balance sheet.)

The panel believes that the potential for renewable energy project finance is in pension funds, institutional investors, and large corporations serving as tax equity providers (such as 90% tax equity). But are temporary tax breaks enough to help cleantech companies get over the bump towards scalability? Michel di Capua, Head of US Analysis at Bloomberg New Energy Finance, believes the economics of tax equity works, but limits the people that can participate. If there isn’t more than $25m in the deal, it’s not worth it.

The problem is not that there is no debt financing, rather, there’s not enough high-quality projects. Besides the Goldman Proprietary Fund, there is financing in growth equity, private equity and commercial banks as well, and the market is $250 billion. More unregulated subsidiaries of utilities have joined top of league tables in wind and solar investments, renewable procurement.  Private equity firms are putting capital into independent transmission companies.

Bernstein believes VC winners now will be counter-cyclical – now is the time to invest when others aren’t so optimistic. If you take out the bad press, rates of return have gone up in solar and wind, so it is an attractive time to invest.

Financing obstacles:

  • policy uncertainty
  • technology risk
  • tax equity works, but limits people that can participate