“No more Solyndras!” may make the headlines but money is continuing to be deployed in the green energy sector each year. It is a global phenomenon. According to an analytical service, Bloomberg New Energy Finance, the first trillion dollars was invested at the end of 2011 and the next trillion will be invested in five years. This is occurring because renewable energy technologies and clean energy are beginning to scale globally, due to cost reductions and wider deployments. Added to this reality is the phenomena of impact investing as younger people with money are more engaged in clean energy solutions. This factor is significant, with 52% of the world’s population being under 30 and generational wealth being transferred to the young.
Another factor in this rising green financial milieu is the nascent impact of crowd funding. Solar Mosaic, a photovoltaic solar play in New York and California, was able to raise $1.1 million in one day for several projects in multifamily housing. The projects are expected to generate 4.5% returns for many years. More capital will be flowing into US clean energy as community solar takes off and smaller investors, who are not accredited at $ 1million in net worth, begin deploying their capital in this sector. It is the law of large numbers and it is opening a flood gate
in innovative financing. The SEC has yet to write the rules of the game in this emerging arena catalyzed by the Jobs Act.
While politicos continue to carp about subsidies for renewable energy, we are already seeing reductions of the costs for renewable energy technologies. This is led by solar and wind energies. Recently, we are starting to see an uptick in tidal/ocean energy which is still in its infancy. Existing technologies for clean energy will be followed by better technologies for this energy source and these solutions will come from all over the world as there are few geographic barriers to entry.
The other factor barely mentioned in any debate on clean energy is that there are health care benefits to a cleaner environment from renewable and energy efficiency sources. By using no or free fuel, the benefits are tantamount to reductions in health care costs down the road. Instead, the opponents of green energy keep harping on costs rather than these benefits.
The bottom line is that today’s technology is already attracting capital from nontraditional sources like pension funds and insurance funds looking for environmental alpha, i.e. returns above market. Coupled with the advent of crowd funding, more channels of capital are being attracted to this new green asset class. This is the essential truth: the clean energy train has left the station and is accelerating.
Peter C. Fusaro, Chairman of Global Change Associates in New York, holds the 12th Annual Wall Street Green Summit on March 18th in New York City. More information on this event can be found at www.wsgts.com