Bankers, scholars, policy makers and executives probe solutions for accelerating clean energy finance
By Mark Golden
Stanford’s Jeffrey Ball, Bank of America Vice Chairman Anne
Finucane and John Kerry in a lighter moment of their
discussion to open the conference.
Tripling the present level of global investment in clean energy to the $2.3 trillion needed annually to limit global warming is an enormous challenge, but most countries and many U.S. states and cities are committed to avoiding the worst effects of climate change. So, energy infrastructure is also potentially a tremendous investment opportunity.
How to ramp up the dollars was the topic of the Clean Energy Finance Forum, convened by Stanford University’s Precourt Institute for Energy on Nov. 1. Greater profitability is the necessary and sufficient key for unlocking the necessary capital, said the financiers, politicians, business executives and academics who participated. Greater profitability will require advances in both technology and policy, they agreed.
“Just think about energy and climate change. This market is a multi-trillion-dollar market with 4 to 5 billion users … 9 billion by the middle of the century,” said former U.S. Secretary of State John Kerry
“This is the mother of all markets. We need to seize it. We need to make low carbon energy attractive, now,” said the 2004 Democratic Party presidential nominee, who has been working with Vietnam on sustainable alternatives to planned coal-fired power plants since before he left the State Department.
The financial challenges, however, are as daunting as the business opportunity is compelling. The annual investments needed to restrain global warming would absorb a huge amount of the world’s new investment dollars, noted Stanford’s Sally Benson, co-director of the Precourt Institute and a professor of energy resources engineering. Plus, major institutional investors are conservative, while most clean energy projects are still quite risky.
“Saving the planet from climate change is part of my mission, so long as it can pay a return for my beneficiaries,” said Theresa Whitmarsh, the executive director of the Washington State Investment Board.
Large funds, like the one Whitmarsh directs, generally do not invest in early-stage technology companies because such investments are too small. Risks aside, even if such an investment were wildly successfully that would not materially improve returns for a large fund. To generate the trillions of dollars needed to contain climate change, therefore, will require large companies with products ready for broad deployment.
Putting a price on carbon
Many speakers, like the Hoover Institution’s George Shultz, said that taxing greenhouse gas emissions either directly or through cap-and-trade programs could greatly improve the market position of more advanced renewable energy technologies. Shultz, who held four cabinet-level positions in the administrations of two Republican U.S. presidents, expressed pessimism on getting such a tax passed soon in the United States.
Media coverage of the Clean Energy Finance Forum
The Washington Post: Clean Energy investment needs to triple to halt catastrophic warning, finds news report
E&E News: Investors need to pony up to fight warming
However, as an overview paper written for the conference notes, charging for carbon emissions has become increasingly popular. As of 2013, 40 countries and another 16 states or province around the world priced carbon dioxide emissions, collecting over $28.3 billion in government carbon revenues in the process.
“The challenge is the quantity, quality and location of capital,” said Alicia Seiger, managing director of the Precourt Institute Clean Energy Finance Project. “Developed economies have enough capital to finance, but it’s a question of whether it will be mobilized for clean energy in the scale and speed needed to meet climate change commitments.”
Developing economies, on the other hand, are more important targets for avoiding future emissions, but the high risks of investing in these countries usually mandate much higher potential returns, Seiger and other speakers said.
In addition to the overview paper, Stanford researchers wrote eight papers on specific topics to lay the foundation for the meeting. Speakers and forum participants provided feedback to the papers in workshops.
The Bank of America funded the new research and the forum, and several of its senior executives provided their perspectives. Other speakers included officials from the World Bank, Deutsche Bank, Google, Wellington Management, the State of California, and India’s ReNew Power, as well as researchers and former U.S. Senator Kelly Ayotte.