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Top U.S. Renewable Energy Investors Outline Pathway To Secure $1 Trillion In Project Finance

By Silvio Marcacci, Energy Innovation's Communications Director, and Gil Jenkins, ACORE's Vice President of Communications.

Spurred by wind and solar sector growth, investment in America’s renewable energy industry exceeded $40 billion in 2017 according to Bloomberg New Energy Finance, and is tracking close to the same amount in 2018, showing surprising resilience despite policy headwinds.

While the industry’s continued growth looks like a forgone conclusion, some analysts expect renewable energy installations will decline in the 2020s, putting the U.S. at risk of falling behind other nations that are investing heavily in renewables and the jobs that come with them.

We’d be hitting pause, when we should be doubling down on the energy system – and the energy economy – of the future.

Fortunately, a new financial sector survey shows strong confidence that U.S. renewable energy projects will continue to increase in attractiveness compared to other investment portfolio asset classes, and cumulative U.S. private investment in renewable energy could reach up to $1 trillion between 2018 and 2030.

Renewable Energy Cost Declines

Rapid renewable energy cost declines have made them the cheapest source of new electricity generation in many regions of the U.S.

Renewables were the most-added source of new generation in 2017 – the 11 gigawatts (GW) of new wind and utility-scale solar capacity surpassed even natural gas – marking the fourth consecutive year renewables made up more than half of total U.S. generation additions.

This impressive growth is driving investment and creating jobs, especially in rural areas where economic opportunity can be hard to find. The U.S. Department of Labor recently underscored this job-creation potential by reporting that solar photovoltaic installers and wind turbine service technicians are the nation’s two fastest-growing occupations.

Progress like this validates the sector’s importance as a national economic engine even as the federal government has walked away from the Clean Power Plan and proposed new subsidies for coal and nuclear generation, while developers and investors grapple with new tax laws, solar tariffs, and international trade disputes.

What Energy Infrastructure Financiers are Thinking 

To gauge investor confidence on the impacts of market and policy changes, the American Council on Renewable Energy (ACORE) polled senior-level respondents across the nation’s leading banking institutions, asset managers, private equity firms, and other financial firms.

The survey, "The Future of U.S. Renewable Energy Investment: A Survey of Leading Financial Institutions,” reveals a robust market with significant potential to accelerate the renewable sector’s growth. Two-thirds of respondents plan to increase investments more than 5% in 2018 compared to 2017, and half plan to increase investments more than 10%

While America’s aging grid infrastructure and mixed policy signals could limit future expansion, the financial sector expects renewable energy will continue to be an attractive asset class and anticipates investor confidence will remain high. Under a supportive policy and market scenario, respondents projected that their companies will at a minimum double their expected business-as usual investments in U.S. renewables between 2018 and 2030.

In this same scenario, respondents predict that cumulative private investment in U.S. renewable energy projects, as well as related investment in enabling grid technology, could hit $1 trillion between 2018 and 2030.

Policy Signals and Market Factors will Drive Investment

As with any investment class, renewable energy investors seek long-term policy certainty. The solar and wind industries already know existing tax credits remain on schedule to phase out after 2021, and federal policy signals will remain important to long-term investor confidence.

Investors say federal action to address climate externalities through carbon pricing and/or a technology-neutral tax credit for zero-carbon electricity generation could encourage growth, which is promising considering the increasing conservative support for a national carbon tax. However, state action is likely to also play a significant role in stimulating demand through ambitious renewable portfolio standards along with siting and permitting process reforms.

Market factors like increased corporate purchasinggrowth in energy storage, and accelerating electric vehicle sales are expected to create new renewable energy opportunities – but investors say market-based signals reflecting the values and services provided by energy storage are needed to prevent America’s aging grid from hindering investment.

How America Can Reach its Renewable Power Potential 

The investment potential revealed in ACORE’s survey led the country’s major providers of capital funding for energy infrastructure projects to launch $1T 2030: The American Renewable Investment Goal, a new campaign that aims to reach $1 trillion in U.S. private sector investment for renewable energy and enabling grid technologies by 2030.

This coordinated effort to accelerate the investment and deployment of renewable power as the sector moves to the next stage of market maturity charts a course for America’s investment community to modernize energy infrastructure and create massive economic opportunities over the next decade and beyond.

ACORE identified policy reforms and distinct market drivers that match investor insights to reach the $1 trillion in domestic renewables investment by 2030 goal:

Policy reform

  • A long-term federal policy commitment supporting carbon-free electricity generation, presumably as part of an effort to address greenhouse emissions externalities, after wind and solar tax credits phase out in the early 2020s.
  • Federal, state, and regional policies to promote grid modernization, including rules that allow renewables to compete fairly in electricity markets along with new incentives for energy storage and other enabling grid technologies.
  • Continued expansion of state renewable portfolio standards to support increasing renewable electricity deployment.
  • Reforms to facilitate siting and permitting processes for renewables and transmission.

Market drivers

  • Scaling up energy storage via new business models as well as improved economics and technology innovation to enhance renewable energy integration.
  • Increasing corporate renewables purchasing via diversified procurement options and market incentives to expand renewable energy supplies among commercial and industrial customers.
  • Broadening public awareness and support for renewables and EVs as an actionable solution to combat climate change, leading to increased rooftop solar deployment, EV purchases, and renewable energy demand from electricity consumers.
  • Continuing financial innovation as capital stacks evolve to replace tax equity as a key source of project financing, and to establish a more standardized approach to finance new projects like renewables-plus-storage.

Renewable is Doable

Renewable energy is now economically competitive with fossil fuels, but hitting pause and accepting business-as-usual projections due to an uneven policy playing field will hamstring investment and deployment levels, ceding U.S. leadership and the immense economic benefits coming from this booming global industry.

Major banking institutions have signaled long-term interest in the sector by making large public commitments to invest in clean technologies. Now it’s time for policymakers to do their part to ensure those investments are made in the U.S.

Hitting the ambitious but achievable $1 trillion target by 2030 means America will close the innovation and investment gap with other nations, keep creating tens of thousands of clean energy jobs, and stay within striking distance of the U.S. commitment to the Paris Accord.

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