In 2014, investors allocated $310B in capital to clean energy projects according to Bloomberg New Energy Finance, making up a significant portion of the ~$1.5T in total global investment in energy supply as estimated by the International Energy Association (“IEA”). What’s more, the IEA predicts we will need over $40T in cumulative energy investment by 2035 to meet energy needs, suggesting that the amount of capital needed to be deployed annually for clean energy projects will have to increase by an order of magnitude over the coming decades to meet the dual goals of preventing climate change and powering the world’s economy.
Above: The IEA’s 2014 World Energy Outlook projections for necessary clean energy investment.
As the clean energy finance community grows, it also pioneers new ways to finance low-carbon energy projects. The past few years are no exception: publicly-traded yieldcos have flourished, asset-backed securitization has helped reduce cost of capital for distributed generation companies, and public-private partnerships have helped increase clean energy deal flow.
These financial innovations that enable low-carbon projects have enormous implications for “negative-carbon” projects that scientists increasingly project we will need but that have only just begun to develop. Low-carbon technologies like energy efficiency and renewable energy have had several decades to de-risk technical, regulatory, and financial barriers, and sit well poised to expand rapidly. Negative-carbon approaches must leverage as much of the experience of low-carbon projects as possible if they are to develop to appropriate scale quickly enough to prevent climate change.
Later this month, many low-carbon financial success stories will be on display at the Low Carbon Energy Investor Forum 2015 in downtown San Francisco. I’m excited to be speaking at the event, as the agenda includes conversations on emerging financial innovations, technology developments, and policy support needed to scale low-carbon developments.
What is particularly interesting to me about this, however, is that for an event with the words “low carbon” in the title, the word “climate” appears only once on the agenda — for a session titled “Climate Change – The new factor becoming mainstream among investors.” This shows that, with or without an explicit mandate to fight climate change, the financial sector is committing hundreds of billions of dollars to technologies that are pivotal for fighting climate change. And as much as any financial lesson, negative-carbon solutions can learn from low-carbon solutions the power of strong financial business cases in helping to catalyze the growth of negative-carbon solutions, and make these nascent investments today the “mainstream” investments of the future.
Want to join the Low Carbon Energy Investor Forum? Use the code “lcei15” for a 15% registration discount.