U.S. renewable energy generation capacity has been growing rapidly for more than a decade, spurred on by technological advances and supportive government policies. However, present uncertainty in U.S. energy policies threatens to take the wind out of the renewable energy sector's sails, according to a new report from the American Council on Renewable Energy's (ACORE) U.S. Partnership for Renewable Energy Finance (U.S. PREF).
More than $300 billion has been invested in the U.S. renewable energy sector over the past ten years, as a growing number and range of private sector businesses capitalize on supportive policies and programs at the local, state and federal levels. That's driven well-above average growth in “green” job creation and boosted economic development and growth in local communities and states throughout the nation, as well as enhanced social and environmental health and integrity, ACORE CEO Michael Brower highlights in a news release.
“Federal tax policy has worked, stimulating strong private investment in the past several years and significant system cost reduction, with wind down 43 percent and solar down 80 percent since 2008,” added Todd Foley, ACORE's senior vice president for policy and government relations. “However, lack of policy certainty puts new investment and market momentum at risk.”
Making it easier -- and less costly -- to finance renewable energy systems, whether at the utility or residential scale, is key to stimulating ongoing growth. U.S. renewable energy finance is moving beyond the success realized by tax equity financing of utility-scale wind and solar power project finance, Green Bonds, and the gains realized via third-party residential and commercial power purchase agreements (PPAs). In addition, Congress is considering extending tax-advantaged master limited partnerships (MLPs) to renewable energy companies.
Moving to expand its financing options and accelerate the growth of its third-party solar finance business, SolarCity pioneered the securitization of solar leases for sale to fund managers and institutional investors. Utilities, such as NRG Energy, have spun off renewable energy assets into “yield” companies, or YieldCos. NRG Yield holds solar and wind energy assets with a total capacity of 1.3 gigawatts (GW), U.S. PREF notes in its “Renewable Energy Finance, Market & Policy Overview” report.
“The success of the YieldCo, Green Bond and securitization structures shows the resiliency of the renewable energy finance market,” Timothy Kemper, U.S. PREF member and national co-leader for the Renewable Energy Industry Practice at CohnReznick was quoted in ACORE's news release:
“New finance structures, coupled with policy certainty, will enable a strong, diverse market to see increased private sector investment and growth in U.S. renewable energy infrastructure in the coming years, contributing to economic development and job creation.”In its white paper, U.S. PREF also highlights that although capital markets for renewable energy finance are strong, new investment fell by more than 30 percent from 2011 to 2013, “signaling a significant amount of private capital that has been sidelined as a result of an uncertain market."
As has been true for numerous other economic sectors, including development and growth of the coal, oil and gas industries, supportive government policies are the core of the institutional framework from which renewable energy growth is being realized. Maintaining, improving and enhancing that energy policy framework the key to realizing further gains, ACORE emphasizes.
Among the key takeaways from ACORE's renewable energy finance white paper:
Policy-Driven Investments in U.S. Renewable Energy
Image credit: ACORE
Graph credit: US PREF, "Renewable Energy Finance, Market & Policy Overview," 2014
Renewable Energy Finance, Market & Policy Overview
An experienced, independent journalist, editor and researcher, Andrew has crisscrossed the globe while reporting on sustainability, corporate social responsibility, social and environmental entrepreneurship, renewable energy, energy efficiency and clean technology. He studied geology at CU, Boulder, has an MBA in finance from Pace University, and completed a certificate program in international governance for biodiversity at UN University in Japan.