Policy and Legal Implications of Implementing Renewable Energy at Scale: Finance Gap for Innovation Deployment (Part 4 of 6)

by Mintz Levin - Energy & Clean Technology Matters
Contact

Tom Burton, Chair of Mintz Levin’s Energy Technology Practice, will publish a weekly installment providing insight into the challenges and possible solutions that, if implemented, promise a bright future as clean energy moves America forward. In this series, Tom will include one challenge per week and the potential solution(s). This is the fourth installment of the series.  Read Part I, Part II, and Part III below.

The Problem: Finance Gap for Innovation Deployment

The last decade has seen tremendous innovations in cleantech that have not only brought new products, but also a fall in prices to consumers. For example, the average cost of solar panels has dropped from around $3.50/watt in 2005 to $0.36/watt today, an entire order of magnitude. From 2006 to 2014, worldwide average PV module prices have dropped about 78% from $3.25 per watt to about $0.72 per watt. The last five years alone have seen battery prices drop 72%.

Despite encouraging advances, the industry has seen a shortfall in matching capital to projects. According to Bloomberg New Energy Finance, clean energy investment is essentially right where it was in 2008. Further, according to the Steyer-Taylor Center, investments dropped 67% between 2011 and 2013.The sector needs capital increases to support and scale the many groundbreaking renewable energy ideas out there.

Solution: Consistent Financial Policy

For renewable energy to scale, government must offer consistent and reliable financial incentives for technologies to flourish. Below are just a few examples of government policies that can help scale up cleantech.

  • Although the Production Tax Credit (PTC) and the Investment Tax Credit (ITC) have heavily impacted cleantech investment for years, Congress often extends them on a short term basis, leaving little certainty for investors. On July 21st, the U.S. Senate approved a two year extension of the PTC through July 2016 – a companion bill must now advance in the House. Because the ITC does not expire until the end of 2016, Congress will likely address it in a 2017 tax reform negotiation. To avoid uneven investment drop-offs, the federal government should focus on permanent or long term solutions rather than stopgap measures.
  • Green Banks, public financing institutions that provide low-cost and long-term financing support to clean projects by leveraging public funds to attract private investment, are another example. Banks utilize tools such as long-term and low interest rate loans, revolving loan funds, insurance products, and low-cost public investments or they may even design new financial products. Connecticut and New York have led the way in this effort, but states such as New Jersey, Hawaii, Rhode Island, Maryland, and California have all proposed Green Banks or are employing a related idea (such as green bonds).
    • Connecticut: The Connecticut Green Bank was the first of its kind in the U.S. In 2014, the bank attracted a total investment of $225 million, leading to the creation of over 700 direct jobs and supporting about 40 MW of distributed energy resources. Its flagship program is The Commercial Property Assessed Clean Energy (C-PACE) program, providing owners of commercial, industrial, and nonprofit properties with 100%, low-interest financing to make energy efficiency and clean-energy improvements.
    • New York: Late in 2014, Governor Cuomo announced the first NY Green Bank transactions. Cuomo’s initial announcement included $800 million in investments expected to reduce CO2 by 575,000 tons annually. As of June 2015, the bank had received $734 million in funding requests – half from energy efficiency and the rest divided among wind, solar, and bioenergy projects.
  • PACE: Several states, including California, Florida, Michigan, and Rhode Island have started or are starting Property Assessed Clean Energy (PACE) programs. This system lets homeowners borrow money for energy efficient upgrades and pay it back incrementally on their property tax bills. The idea first picked up steam from the mid to late 2000s, but faced a setback in 2010 when the FHA’s operating agencies, Fannie Mae and Freddie Mac, refused to insure mortgages on houses possessing PACE liens. However, recently the federal government has moved to encourage PACE. In late August, President Obama directed the Federal Housing Administration (FHA) to allow homeowners to purchase and refinance properties with Property Assessed Clean Energy (PACE) loans that are subordinated to an FHA-insured mortgage.

All levels of government must also act as large scale early adopters. Leading by example is a surefire way for clean technology to flourish.

  • President Obama has led the way at the federal level. As part of his Climate Action Plan, he directed the Department of Interior to permit enough renewable projects to power 6 million homes by 2020, install 100 MW of renewables on federally assisted housing by 2020, and deploy renewables on military installations. The President followed this up with a March 2015 executive order calling for a 40% reduction in federal government greenhouse gasses by 2025.
  • Last September, New York City announced a plan for reducing its greenhouse gas emissions by 80% before 2050. Mayor Bill de Blasio has followed up with city government action. In July 2015, de Blasio announced he wants 100% of the city government’s energy provided by renewables. Planning to use the city’s $600 million electric bill to push innovation, the mayor put out an RFI. Proposals were due last month.

Solution: Matching Capital with Projects

Although large cleantech projects are particularly appealing to long term investors (LTIs), the need for direct investment in many of these projects requires sophisticated organizational and human resources that LTIs cannot always afford. Enter the Aligned Intermediary (AI), a non-profit corporation that would bring investors and inventors together to develop and coordinate priorities. Proposed functions for the AI could include:

  • Facilitator – The AI will reduce transaction costs and syndicate risk for LTIs by sourcing and screening appropriate companies.
  • Buy Side Advisor – AIs will bring LTIs the deals that match their needs and minimize use of internal LTI resources.
  • Collaborator – The AI will serve as the hub for key stakeholders.
  • Finance Expert – The AI will include investment experts that understand seed- and growth-stage investing.
  • Syndicator – The AI will create and structure deal flow with high potential for GHG reduction and financial returns.
  • Standardizer -The AI will bring standards and norms to the resource innovation financial markets, including standardized legal forms and structures for philanthropic investors.
  • Anonymizer – The AI will collect data on capital flows and returns stakeholders to better understand investment activity in the sector.

Simply put, an AI could get more human and financial resources on a more significant number of cleantech transactions. For a more in-depth look at AIs, see Alicia Seiger’s working paper from the Steyer-Taylor Center for Energy Policy and Finance.

[View source.]

Written by:

Mintz Levin - Energy & Clean Technology Matters
Contact
more
less

Mintz Levin - Energy & Clean Technology Matters on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.