Investing in clean energy is generally seen as nice to do, but rarely profitable when compared with dirtier fossil fuels.
But in the sustained search for returns that can show total growth beyond those produced by major equity indexes, funds are beginning to flow at an ever-accelerating rate into markets for clean energy technologies and the companies that develop and provide them. In a global investing environment, much of that funding is going abroad, raising concerns on Capitol Hill.
The clean energy market is forecast to triple in size during this decade, from $740 billion in 2009 to over $2 trillion by 2020, exceeding global GDP growth even under the most conservative growth scenario, cleantech investors claim.
“The proof is in the pudding,” Neil Auerbach told Breaking Energy last week after testifying in Congress on the prospects for clean energy funds.
Managing partner of Hudson Clean Energy Partners, a private equity firm that manages over $1 billion in assets and invests exclusively in clean energy technology, Auerbach has spent much of his post-Goldmann Sachs career convincing wealthy clients to invest in renewables.
He told the Congressmen that renewables are more than just “interesting technologies.”
Cheaper, More Widespread
“More solar capacity was installed in 2010 around the world than nuclear power,”Auerbach wrote in his testimony. He noted that prices for renewables were dropping at the same time as they were becoming more widely used and more reliable.
He noted at the hearing that the bulk of this growth is not occurring domestically, noting that both China and Germany were far outpacing American development.
Auerbach is optimistic, however, that with increased investments, the United States can become a leader in the renewables industry. He said that currently, renewables projects are in “dire need” of investment. That is why he, and his firm, are supporting a reverse auction proposal that would encourage private investment in renewables.
The Egg And The Chicken
The auction, would provide funding to the lowest bidder, whichever company can propose the cheapest renewables development project, per megawatt of generation. It would also solve the “chicken and the egg,” by providing funding through various revenue streams so that companies would not have to risk developing without a power purchase agreement in place from a utility.
He noted that such a reverse auction has been conducted successfully in Brazil, under the feed-in tariff incentive policy, partially because it provided developers funding across the board.
“Our recommendation is to make [the auction] a one stop shop and give the winner all the revenue they need for this renewable power project,” Auerbach said.
Funding for the auction would come from a specially designed “American-Made Energy Trust Fund,” created from interest on current profits from conventional power sources.
Auerbach is clear that he has nothing against others forms of power generation.
“We’re not opposed to other resources,” he said. He hopes that renewables can partner with thermal plants to reduce America’s dependence on foreign oil and better compete in the global power market.