Sunday, November 16

A Federal Investment Bank For Renewable Energy

wind power

With the current financial crisis, the US has become like a typical third world nation –it’s now practically impossible to get investment debt financing, even for renewable energy for electricity we need, and with the paybacks of solar, geothermal and wind power.

Ever since the 60’s, the US Government has helped developers and lenders finance projects in the developing world where commercial lending was previously either non-existent or considered too risky.

Deutschbank and ClimateIntel both propose that we now create that same kind of quasi-governmental agency to jump-start the clean technology sector of renewable energy technologies in the U.S.

The US Government has dealt with this kind of investment problem in the third world by providing government-backed investment through its Overseas Private Investment Corporation (OPIC).

The creation of a Renewable Energy Private Investment Corporation (REPIC) would provide a market-based mechanism to achieve similar goals.

The current financial crisis could serve a similar impetus in connection with the financing and developing of renewable energy projects that today, because of the crisis, cannot attract debt financing.

Moreover, the experience gained from OPIC would render a REPIC able to provide financial assistance in a sufficiently short time frame to have an impact on the economic crisis.

By creating REPIC and involving it in the financing of not only renewable energy projects along with new technology the Obama Administration could directly facilitate the development of new technology and projects, giving rise to “green” jobs and increased employment.

Not only is solving climate change the mother of all necessities, but there is already legislation that demands investment in renewable energy — but now, no mechanism to finance it.

One piece of legislation — a nationwide Renewable Portfolio Standards bill — will easily pass the next Senate with its near 60 majority. Many of the 26 states that have passed RPS already have utilities in danger of incurring fines for not meeting the new higher percentages it requires of renewable energy. The slowdown will bring only increasing friction between what is required and what can be financed and built in time for each mandated deadline.

Here in California, PG&E is likely going to be fined for missing its 20% renewables target by 2010. It now gets 14% from renewables. Climate change has played a part ,as we now have less snow-pack. But with the investment slowdown, it is now increasingly unlikely that PG&E will hit its target.

However, if a quasi-governmental investment bank were to guarantee utilities the loans they need to meet the mandated investments, that would solve the problem. And it would not expose the bank to risky loans, as renewable energy has a certain payback; the ground is not about to run out of heat or cold any time soon, nor the sky out of wind and sun. In fact, the U.K. is now reaping the financial rewards ( U.K. Guardian) of its mandated investments in renewable energy 15 years ago to meet Kyoto requirements:

The government profits come from a scheme set up in the 1980s to support renewable energy projects by guaranteeing to pay developers building wind, biomass and other non-fossil fuel generation plants a fixed price for their electricity for 15 years.

During the first decade of the so-called Non-Fossil Fuel Obligation scheme, it ran at a loss, paid for by consumers. But over the last six years, rising electricity prices have allowed the government to cash in on the energy contracts at a substantial profit.

The same thing would happen in the US. Unlike fossil-based electricity, renewable electricity prices will remain stable; once the capital investment is paid off — typically in 15 to 20 years — the fuel is free.

Photo Credit: inside view of a turbine by Flikr user Frogdog*
Via: ClimateIntel and Green Wombat

For Cleantechnica