Having spent the last week at the Renewable Energy Finance Forum (REFF) in New York City several common themes and key trends surfaced that we thought we would share in reflection.
REFF had more than 50 renewable energy thought leaders speaking to the over 700 attendees. The most noteworthy to us were (1) Katherine Hammack, Assistant Secretary of the Army for Installations, Energy & Environment, U.S. Army, (2) Richard Kauffman, Senior Adviser to the Secretary of Energy, US Department of Energy, and (3) Lyndon Rive, Chief Executive Officer of SolarCity.
Large Renewable Energy Commitment’s Are Possible: Katherine Hammack spoke very passionately about one of the largest commitments to clean energy in our nation’s history by the Army, Navy, and Air Force to deploying 3 gigawatts of renewable energy without tax payer money, which means an very good financing opportunity for investors.
Consistent Policy and Incentives Are Still Needed: Richard Kauffman spoke of our $260B global clean energy industry, challenging the US’ lack of consistent policy and incentives when other countries continue to double down on their investments such as in India, Japan, and China. Mr. Kaufmann was very encouraged by new lenders waking up to the potential of renewable energy projects. He is working on policy interpretation and changes to allow new Real Estate Investment Trusts (REIT) and Master Limited Partnerships (MLP) products to come to market to continue to help drive down the cost of capital. Key fact that I’ve calculated, every single percentage in cost of capital reduces project cost by about $0.20/W, our single largest lever now that panel prices have cratered to $0.85/W levels.
Lyndon Rive, Founder and CEO of SolarCity notable quote: “Solar Should Drive A Lower Cost of Capital Not the Reverse”. SolarCity has seen less than a .5% default rate across its customer base. He thinks there should be less scrutiny around credit as most people/businesses will continue to pay their electricity bill regardless of whether it is generated from a renewable energy generation asset. The alternative is paying the utility instead at a higher price or having electricity shut off shut off all together.
Michael Eckhard Head of Citigroup renewable energy group notable quote: “we are 40 years into a 100-year transition to clean energy with over 90% new construction since 2002 been through much cleaner plants such as solar, wind and gas. For the next 60 years, in order for renewable energy to continue to evolve as a significant power producer, the industry will have to step up to educate capital market investors on renewables as a strong asset class.”
Our overall takeaway from the conference is the continued importance of educating a large pool of investors sitting on the sidelines looking for places to invest with manageable risk. The conference had a disproportionate number of attendees focused on continuing to find ways to educate new investors that “solar” as a low risk investment with excellent returns.
Bill Clinton had a banner up during his first election that said “It’s the economy stupid”. Let us rephrase that for the renewable energy industry “It’s the cost of capital stupid!” Let’s drive it down.