Capital Innovation Program
Capital Innovation Program
Increasing the availability of capital has the potential to transform the economics of advanced energy deployment and create pools of investment capital to fund advanced energy innovation and commercialization. While the cost of advanced energy technologies has been rapidly declining, a price gap remains between advanced energy and traditional, fully depreciated energy sources. With federal incentives uncertain and public resources limited, private capital must be mobilized to meet the needs of a national – and global – energy system in transformation.
The current process of capital formation for advanced energy is inadequate to the task. A case-by-case approach to the financing of projects, uncertainty over risk, and a lack of accurate financial models increases the cost and lengthens project completion time for even routine projects using mature technologies. Furthermore, a lack of standardized data and loan terms hampers the ability to access capital markets in a way that would dramatically increase the scale of capital available.
With its active membership of advanced energy companies, high-level relationships with leaders in the finance community, and national network of state partners, Advanced Energy Economy (AEE) is well positioned to serve as a catalyst in accelerating the pace of financing for advanced energy projects across the country.
The Capital Innovation Program aims to radically increase the flow of capital into the advanced energy sector, reaching the scale required to meet the size of the opportunity. AEE will meet this challenge by engaging and connecting top-level executives of advanced energy companies with leading finance professionals to develop, advocate for, and support implementation of innovative public and private sector capital formation strategies. These strategies aim to provide attractive economic returns for lenders and investors while offering financing to companies on terms that allow for growth and business success. By addressing the full capital spectrum, including debt and equity financing for innovation, commercialization of research, manufacturing, and widespread deployment of advanced energy solutions, AEE will offer a comprehensive suite of pragmatic, workable models for consideration by policymakers and finance professionals.
AEE’s capital innovation work will be tailored as necessary to capitalize on specific opportunities. This may include developing innovative financing proposals around AB 32 and Proposition 39 in California; supporting policies that leverage public resources with private capital on the state level; and working with policymakers ranging from mayors and county executives to state treasurers and governors, customizing financing options to meet specific objectives.
Low-Cost Capital for Projects and Installations
Driving down the cost of capital for project development can reduce or eliminate the cost differential between advanced energy and traditional sources, spurring deployment of solutions ranging from utility-scale wind and solar power to distributed generation and building retrofits. Elements that will be considered in the development of private-public partnership models include:
Loans and loan participation agreements, leveraging public funding sources with private capital
Credit enhancements and greater flexibility in repayment schedules, lowering both interest rates and payments for borrowers while ensuring market returns for lenders
Standardization of loan terms and data collection to facilitate access to the secondary markets
Financing Innovation and Commercialization
The financing of technology innovation and commercialization requires different approaches than deployment of energy efficiency and mature renewable generation technologies. AEE will work with member companies and investors to develop and implement strategies to increase the availability of equity for innovative companies through public-private partnerships, and look for ways to link new funding with business services to enhance the likelihood of success.
Business Led, Business Driven
AEE’s capital innovation efforts will be informed and driven by direct business input from advanced energy companies and leaders in the finance community. Our efforts will be guided by a Capital Innovation Council made up of advanced energy business leaders with expertise in finance and finance experts with a proven track record of investing in and lending to advanced energy companies and projects.
Please contact us if you are interested in learning more about this initiative.