REFF Wall Street Focusing on the Facts

Combating a year of what was termed scoffing and scorn in the media about clean tech, the Renewable Finance Forum focused not on the good news, but the real news.

And the real news is billions in investment, a military dedicated to energy security, initiatives to heal the crumbling United States energy infrastructure, and new financing models. To quote Dragnet's Sargent Friday, "Just the Facts Ma'am" could well be the title of this year's REFF Wall Street, The Renewable Energy Finance Forum, held at the Waldorf Astoria in New York on June 19-20. Leading the initiative, Vice Admiral Dennis V. McGuinn, President of ACORE, (American Council on Renewable Energy), announced the launch of energyFactChecker.org. Leading with Solyndra – the failed California solar company that has gotten so much bad press -- the site quotes Jeff Immelt, CEO of General Electric:

"We are all-in. We are going to invest what it takes; Because I know by 2020 this is going to be at least a $1 billion product line. I don't care about Solyndra or any of that other stuff."

Dan Adler, President of the California Clean Energy Fund (CalCEF), echoed that thought, mentioning that Solyndra represented a 2% failure rate of the loan guarantee program. The guarantees mitigated risk for developers and investors, attracting millions in private capital and delivering successful projects 98% of the time. “Show me a private portfolio with that low a loss rate," Mr. Adler chuckled.

Department of Defense Initiatives

Another big win for clean tech, which was talked about throughout the two days, is the military. Katherine Hammack, Assistant Secretary of the Army for Installations, Energy & Environment, talked about planning for 1 gigawatt in renewable energy for every branch of the military. She spoke about the money going into new facilities, financing R&D for breakthrough technologies, and building a safe energy future. DOD (Department of Defense) has spent billions on energy for mission effectiveness: concerns include energy security and base independence; support for soldiers in remote or field locations; and worries about an energy infrastructure at home with an aging electric grid.

Electricity Generation by Fuel Type

 

A big concern for many energy executives is the dilapidated coal facilities. A panel moderated by Laura Lovelace, Co-Founder and Managing Director of Wellford Energy, and Madeline Tan, Partner at Kaye Scholer LLP, discussed the implications of 70% of coal plants that are over 30 years old. Some are too old to be refurbished and will soon be shut down, while others will take millions of dollars to refurbish or rebuild. By 2035, a third of nuclear plants that are aging, will also come off-line. In the current political climate, it is more likely that there will be another 6% decrease of electricity generation between 2029 and 2035, because of the lack of new plants being designed, approved and built. These actions will leave a gap in the base load for utilities, leading to black-outs and brown-outs, or severe restrictions on use at some times of day and during high demand -- peak -- periods.

New Industries: the Nexus of Natural Gas and Renewables

Acknowledging that renewables alone cannot solve the problem was the topic of a panel on renewable energy and other fuel sources, moderated by Kenneth R. Locklin, Managing Director at Impax Asset Management LLC. The panel focused on natural gas, which has many advantages over coal-fired power plants, in addition to being cleaner and plentiful. Natural gas turbines start up quickly, as opposed to fossil fuel plants, which are slow to start and slow to stop. Modular facilities, with an array of natural gas turbines, could balance weather- and time-of-day-dependent technologies. Such a mix will fuel (pun intended) several other new industries that are uniquely suited to United States energy sustainability. Examples range from clean and safe extraction processes; measurement and other data technologies to anticipate load demands; and new storage capabilities, such as batteries and hydrogen fuel cells to name a few.

Federal Policies

Another major topic interspersed amongst many panels during the conference was what's next as Federal government support recedes. Acknowledging the reality that there is little appetite on Capital Hill for subsidies, attention was given to the industry need for certainty and stability. Master Limited Partnerships (MLP) was one of the most talked about topics, as there is a bill to extend MLPs -- currently only available to oil and gas -- to renewable and alternative energies. A Master Limited Partnership is a limited partnership that is publicly traded on a securities exchange. It combines the tax benefits of a limited partnership with the liquidity of publicly traded securities.. The MLP legislation was supported by Dan Reicher, Executive Director of the Steyer-Taylor Center for Energy and Policy Finance at Stanford Law, and former Director of Climate Change and Energy Initiatives at Google. Mr. Reicher has also long been an advocate for CEDA (Clean Energy Deployment Administration) that would create a "green bank" to invest in new projects. Apart from initial Federal dollars, CEDA would become self-sustaining and eventually a profit center. Echoing Mr. Adler's earlier remarks on the low failure rate of the current loan guarantee program, Mr. Reicher sees such a fund as a win-win for all around. Richard Kaufman, Senior Advisor to Secretary of Energy Steven Chu, US Department of Energy (DOE), sees a mature renewable industry ready for a set of standards that would measure different approaches, creating a more robust securitization market. Such a financial vehicle would be able to aggregate similar projects into portfolios that could offset inflation risk, providing predictable returns and managing fluctuating energy costs. He pointed out that pension risk managers are short on long term paper options, providing renewable projects with a ready market. Daniel C. Esty, Commissioner of the Connecticut Department of Energy & Environmental Protection (DEEP) added that states are stepping up in order to create a stable renewable energy market through RPS, (renewable energy portfolio standards) that have made a predictable REC, REIT and other markets [TGE article here for more information] possible. Such policies need to have ten and twenty year time lines, in order to meet the market demand for predictability. Mr. Kaufman summed up his remarks with thoughts about distributed energy and the role that it will play in the future. He sees a new paradigm, where utilities develop unique solutions tailored to their markets. One example is individual commercial buildings powered by the DC (Direct Current) output from solar and wind, going directly to lights and computers, bypassing the inefficient and wasteful DC-AD-DC conversion process. Supported by storage devices, these buildings could be managed by a utility, supplying converters for peak loads along with digital enhancements to deliver more efficient power for fluctuating demand. While some at the conference felt that renewables had had a very hard year in the press, the reality may be that some have talked too long about renewables as a primary energy source, an expectation that will take decades to achieve, if it is achievable at all. However, at 10% of the current electricity mix, it is a billion dollar industry that is changing the energy landscape. As EnergyFactChecker.org shows:

  • 46,000: Total number of U.S. jobs associated with new clean energy projects announced in Q1 2012. (Source: Environmental Entrepreneurs (E2)
  • 661,000: Number of jobs supported by the growing green building sector -- one-third of the U.S. design and construction workforce. (Source: McGraw Hill)
  • 401,600: Number of American jobs supported by the ethanol industry in 2011. (Source: Renewable Fuels Association)
  • 155,000: Americans employed by suppliers of clean and efficient vehicle components in 2011. (Source: NRDC/NWF/UAW)
  • 75,000: Total employees in the US wind industry in 2011. (Source: AWEA)
  • 100,237: Total workers in the US solar energy industry. (Source: The Solar Foundation)

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