Part Two: Honing in on investment to deflate the Carbon Bubble

Part Two: Honing in on investment to deflate the Carbon Bubble

[Part 2 of a two-part series; view Part 1]

Investing in a new energy future

This year, the global investment community is looking at the threat of climate change with fresh eyes, having witnessed the economic damage caused by extreme weather events, such as the hurricanes and droughts that have swept the US.  The discussion has moved on from solely the question of how to prevent runaway climate change, to how we put resilient infrastructure in place to defend against its impacts, here and now.  Already, the insurance industry has adapted and carriers are calculating the impact of weather events as a function of climate change and pricing the risks into policies.

Climate investment funds are becoming more numerous, for example, the United Nations’ new global financial institution, the Green Climate Fund (GCF), aims to raise a massive $100 billion a year by 2020 for carbon mitigation and adaptation programs.

On a smaller scale, cooperatives are also growing in stature as a means to fund clean energy projects, Westmill Solar in the UK for example last year raised over £2.5m for a 20,000 panel solar park, funded from, and for the local community.  Similarly, the ubiquitous nature of the internet is opening the door for ‘crowd sourced’ solar funding projects, such as Solar Mosaic.

Lastly, but significantly this year, large corporate investors are driving a growing spike in cleantech investments.  Private investment is coming from both energy companies, such as Shell, which in December participated in a $26 million funding round for solar thermal company GlassPoint Solar Inc., through to major retailers, such as Ikea, which are investing in renewables to take themselves ‘off grid’ in order to protect against rising energy costs.

Fostering cleantech investment in 2013

In the current atmosphere of wavering government support for the green economy, how can clean technologists build confidence understanding with asset owners?  Maintaining confidence with both policymakers and funders is critical, it’s up to technologists to provide consistent proof of their business cases, in a diverse range of scenarios.  Of course, it’s better to under promise and over deliver, but at the same time it’s vital that the commercial growth pathways of technologies are demonstrated in a clear, strategic way.

Government and industry must ultimately work together on sustainable energy infrastructure, but industry cannot wait for that to happen.  Technologies must be proven at scale, which both influences investment and policy, but also stimulates low carbon investment when policy is decided upon.

Lastly, it’s vital for clean technologies to appeal to the universal nature of asset owners, in order to demonstrate the opportunities of the low carbon economy as a whole.  The more investors are exposed to a portfolio of diversified low carbon investments, the more likely they will be to invest.

Greater than the sum of its parts

Fundamentally, all clean technologies face the same challenge of justifying longer paybacks on investment to realise energy savings down the line.  The low carbon economy is a paradigm shift; to achieve it requires cleantech verticals to talk and work together.  Whilst there are many disparate technologies, there are also many distinct synergies, which technologists should leverage collaboratively, to justify investment.  Recent advances in energy storage, for example, which has a symbiotic role in driving returns on renewables, energy efficiency and smart grid, has the potential to coalesce clean technologies for the first time, which is a very exciting prospect for 2013.

 

Nick is head of Cleantech at Edelman UK

Follow him on Twitter at @naughtster and LinkedIN