Tag Archives: solar PV

Millennials: the new power generation fueling the future with clean energy

October 12, 2016 |

 

wind-turbines

You might expect wind industry executives at last week’s AWEA Wind Energy Finance & Investment Conference 2016 in New York to talk enthusiastically about the transition to clean energy. But over the last year, utility companies and Independent Power Producers (IPPs) have joined them – proclaiming that that the clean energy future has arrived now – much sooner than any of us thought possible.

What’s driving this? First, in much of the US it now costs more to generate additional electricity by burning more fossil fuel in existing plants than it does to buy it from a new utility-scale onshore wind or solar PV farm. This is a result of steady policy support and steep cost reductions in solar and wind costs.

But another, less well-known driver is that the millennial generation – the largest generation in US history, even bigger than the Baby Boomers – wants renewable energy. Utilities and IPPs point to surveys that indicate a strong demand pull from millennials as their emerging customer base with a strong desire to get off coal. Millennials want their electric vehicle, or better still car share vehicle, to be powered by the sun and wind, not millennia-old carbon.

For the renewables industry, it’s a perfect storm. But one of the challenges the industry now faces is to figure out how it can finance all that new generation in a market with low costs of generation, low demand growth, falling prices, and subsidies that are scheduled to phase out over the next decade.

The only way this can happen is if costs can keep falling.

One way this could happen is through continued technological progress. Last month, researchers at the National Renewable Energy Laboratory and the Lawrence Berkeley National Laboratory published their forecast for a 24%-30% drop in the Levelized Cost of Electricity for wind by 2030 and a 35%-41% drop by 2050.

But we think the decrease in costs could be even more dramatic than that with new financing instruments that could reduce the cost of financing by 20%, which in turn will accelerate those LCOE reductions.

Over the past year, we have been working with investors on such an instrument as part of a program funded by the Rockefeller Foundation. Despite the volatility YieldCos experienced last year, we believe there is a new model that can salvage the positive elements of this design, while restoring a much closer link to the cash flows of the underlying renewable assets.

The new instruments – Clean Energy Investment Trust (CEITs) – will still be publicly traded listed vehicles, but instead of a growing portfolio of assets, each CEIT will consist of a fixed portfolio of assets generating reliable cash flows over the life of the vehicle. A closed pool of assets, the CEIT would offer a fixed income-like return profile that would be more sustainable over the long term but at a level somewhat higher than currently available on investment grade bonds.

uday-on-awea-panel-cropLast week, I spoke about CEITs during an AWEA conference panel moderated by Susan Nickey at Hannon Armstrong who led the introduction of Real Estate Investment Trust (REITs), a market now worth $1.8 trillion in the US.

We’re hoping for a similarly transformational impact from pension funds and insurers looking to match their investments with their long-term liabilities. Our analysis shows that US-wide, a 10% reduction in Power Purchase Agreement prices would allow wind to economically displace an additional 30.5GW of mostly coal generation and 154.5 million tons of CO2 – equivalent to taking 28.2 million cars off the road.

CPI Energy Finance’s executive director, David Nelson, will this week present some of our work on CEITs so far to an audience of institutional investors – pension funds, life insurance companies – at the IPE Real Assets & Infrastructure Investment Strategies Conference in London. We will also be publishing several reports on CEIT structure and market potential by the end of the year, the first of which you can read here.

Pensions and life insurance policies are probably the furthest thing from the minds of Millennials, many of whom are just now coming of age and entering the job market. But their expectations about the world they want to live in and actions to mitigate climate change are driving a transformation in energy that will benefit not only their generation, but those that follow them.

 

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3 Reasons for Measured Optimism about Climate Finance

December 4, 2014 |

 

A version of this blog first appeared on Responding to Climate Change: http://www.rtcc.org/2014/11/21/three-reasons-to-be-optimistic-about-climate-finance-flows/

This year’s UN climate talks opened in Lima earlier this week and for those who hope the world can avoid dangerous climate change, some major recent announcements have given cause to celebrate. Last month, the world’s two largest emitters – the U.S. and China – reached a deal to tackle emissions. Then, the U.S., Japanese, and UK governments joined others by pledging billions to the Green Climate Fund to help developing nations deal with climate change. These political announcements are clearly timed to inject momentum into the negotiations taking place in Lima. But key questions remain unanswered: What do these financial pledges mean in terms of existing investment in a low-carbon economy future? How should money be spent? And are we on the right track?

At Climate Policy Initiative, our analysis of global climate finance flows helps to identify who is investing in climate action on the ground, how, and whether investments are keeping up what is needed to transform the global economy. We have just released the latest edition of our Global Landscape of Climate Finance report. It shows global climate finance has fallen for the second year running and we are falling further behind the level of investment needed to keep global temperature rise below two degree Celsius – but reveals some positive news as well.

Firstly, that nations around the world are investing in a low-carbon future in line with national interests. Last year, climate finance investments were split almost equally between developed and developing countries, with USD 164 billion and USD 165 billion respectively. With almost three-quarters of total investments being made in their country of origin, the majority of climate finance investments are motivated by self-interest—either for governments or businesses. Motivations include increasing economic productivity and profit, meeting growing energy demand, improving energy security, reducing health costs associated with pollution, and managing climate risk including investment risks.

Secondly, that getting domestic policy settings right offers the best opportunity to unlock new investment. When policy certainty and public resources balance risks and rewards effectively, private money follows. In 2013, private investments made up 58% of global climate finance with the vast majority (90%) of these being made at home where the risk to reward ratio is perceived relatively favorably. Addressing the needs of domestic investors offers the greatest potential to unlock investment at the necessary scale. This is not to say that international and domestic public policies, support and finance don’t have complementary roles to play. It is significant, for instance, that almost all of the developed to developing country finance we capture in our inventory of climate finance flows came from public actors. But ultimately, it is getting domestic policy frameworks right, with international support where appropriate, that will drive most of the necessary investment from domestic and international sources.

Thirdly, that despite a fall in overall investment, money is going further than ever. While investment fell for the second year running, this is largely because of decreased private investment resulting from falling costs of solar PV and other renewable energy technologies. In some cases, deployment of these technologies is staying steady or even growing, even though finance is shrinking. In 2013, investment in solar fell by 14% but deployment increased by 30%. Technological innovation is reducing costs and because of this renewable energy investments in some markets are cheaper than the fossil fuel alternatives, particularly in Latin America. Achieving more output for less input is one of the basic foundations of economic growth, so this is great news. From solar PV, to energy efficiency and agricultural productivity, growing numbers of low-carbon investments are competing with or cheaper than their high-carbon counterparts. This despite a highly uneven playing field in which global subsidies to fossil fuels continue to dwarf support for renewables and where carbon prices do not reflect the true costs of emitting CO2.

So what do our findings mean for the recent China/U.S. deal and Green Climate Fund pledges? Increasing political pressure on other countries to keep pace in terms of their domestic action and international commitments is an encouraging sign as the deadline nears for finalizing a new global climate agreement in Paris just one year from now. Reaching a global accord offers the best prospect for tackling climate change. But we must recognize that international agreements are themselves, guided by collective national interests. There is clear recognition that international public resources should complement and supplement national resources where these are insufficient. But if we are to bridge the investment gap they should also be focused on finding ways to lower costs, boost returns and reduce risks for private actors. Public finance alone will not be enough to meet the climate finance challenge.

Many private investors are ready to act. In September, over 300 institutional investors from around the world representing over $24 trillion in assets called on government leaders to phase out fossil fuel subsidies and implement the kind of carbon pricing policies that will enable them to redirect trillions to investments compatible with fighting climate change. Businesses and citizens are investing, and technological innovation means more and more investments are making economic and environmental sense. Accompanying innovation with policy, appropriately targeted finance and new business models can build the momentum and economies of scale to make the low-carbon transition achievable. The low-carbon transition isn’t just a way of reducing climate risk, it also represents a huge investment opportunity.

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India’s Solar Mission is making good progress for solar PV but not for solar thermal

August 28, 2013 |

 

Gireesh Shrimali is an Assistant Professor of Energy Economics and Business at the Monterey Institute of International Studies and a Fellow at Climate Policy Initiative.

In 2010, India set an ambitious target to develop 20,000 MW of solar energy by 2022.

This target, implemented through the Jawaharlal Nehru National Solar Mission, called the Solar Mission hereafter, was to be achieved in three phases: Phase 1 by early 2013; Phase 2 by 2017; and Phase 3 by 2022. The Phase 1 was to be implemented in two batches: Batch 1 with capacity targets for solar PV and solar thermal; and Batch 2 with a capacity target for solar PV only.

As of June 2013, it appears that the Solar Mission has been moderately successful in deploying solar PV. Based on metrics developed in a recent paper with Vijay Nekkalapudi (submitted to Energy Policy), “How Effective Has India’s Solar Mission Been in Reaching Its Deployment Targets,” where we looked into the effectiveness of the Solar Mission in achieving its targets and offer suggestions for improving its design, the performance of the Solar Mission has been 8.4 on a 10 point scale.

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