Financing Renewable Energy

Stephen Lacey’s podcast this week on Crossing the Valley of Death was simply terrific. In the first 10 minutes or so, he delivered interview snippets with several top players in the financing of energy innovation, each pointing to a singular basic fact:

There is a gap between the interests of venture capitalists (who want to invest a few million dollars in projects that are likely to produce large short-term profits) and the interests of institutional investors and banks (who, while they will take long-term positions, do so only in mature, risk-free technologies).

The show went on to discuss a variety of different work-arounds to the challenge, including an initiative now working its way through Congress: the creation of a new entity housed in DOE, the Clean Energy Deployment Administration (CEDA). Supporters claim that CEDA would bring strong financial expertise and a specific purpose to create an attractive investment environment for the development and deployment new clean energy technologies. 

The only thing I would add is that this entire discussion is occurring in the context of renewable energy that is currently expensive vis-à-vis fossil fuels. A few of the folks Stephen interviewed mentioned this casually, but it's really at the crux of the entire issue; I know I’ve mentioned this "level playing field" concept before, but this is where the central problem lies. If you a solution that makes a bloated government even bigger, go for it. But if you you believe that "that government is best that governs least," and you want market-based capital formation to drive the clean energy industry, all you really have to do is remove the subsidies given to fossil fuels, the problem will take care of itself more or less instantly.

Craig Shields is editor of 2GreenEnergy.com and author of Renewable Energy - Facts and Fantasies (published by Clean Energy Press, 2010)