Recapping NECEC's Virtual Cleantech Financial Innovation Summit
On June 25, 2020, NECEC held its fifth annual Cleantech Financial Innovation Summit virtually over Zoom, exploring the key challenges and barriers the Northeast faces when financing cleantech and sharing successes from the financial and cleantech industries. After a warm welcome provided by Alistair Pim, NECEC’s Vice President of Innovation & Partnerships, a fireside chat ensued moderated by Peter Rothstein, President, NECEC. Alicia Barton, outgoing CEO and President of NYSERDA, initiated the conversation by communicating the success during the current COVID-19 crisis as New York advances the framework for state climate law and decarbonization implementation which create clean energy jobs and ensure energy affordability.
Alicia affirmed the importance of a clear strategy to turn the vision of having 70% of the energy supply in New York from renewable energy sources by 2030. The electric sector has to take the lead on decarbonizing and the State has different tools to support it like NY Power Authority, NYSERDA, and SUNY. When we have various institutions with different tools coming to work together, we find a synergy that allows the goals to be achieved.
The chat continued as Jeff Eckel, CEO of Hannon Armstrong, the first public company to invest in clean energy, spoke to attendees. Jeff sees decarbonization as a finance problem. The traditional financing model has to innovate to allow capital to flow to these products for faster scaling. When asked about what policies enable his firm, Jeff answered that he sees current state energy policies as supportive. However, like a tailwind, the public sector is making investments in decarbonization against the headwind of the Federal Government and hostile US states. Businesses should not rely on federal policy to be profitable. Moreover, Jeff states that he learned that state policies are key for financial innovation. Innovation will not advance until we align private investment with state policies. He noted that he sees the cost of capital rising for fossil fuel projects and decreasing for clean energy projects, and as this gap widens, the pace of deployment of clean energy will increase.
After the fireside chat, Alistair introduced the panel “Accelerating clean energy deployment with new combinations of risk capital and insurance plus innovative business models.” Panelists Ravina Advani, Managing Director at BNP Paribas; Will Silbia, Founder at Urban Systems; David Soares, CEO at Lexden Capital and George Thomas, Co-founder and Partner at New Urbana Ventures Studio. After the brief introduction, Alistair asked the panel, what are the barriers of implementing foreign, proven technology into the US infrastructure? Will explained that, as an outsider to the market from Sweden, the established infrastructure ecosystem is tough to penetrate, and that the engineering’s industry risk mitigation and insurance setup has become more concrete over time which makes adaptation to innovative ideas difficult. David responded to Will by adding that finance needs the construction industry and developers to provide warranties of the performance of new technologies.
Insurance companies have the expertise to assess risk and can play a role. Banks are responding to varying degrees of how much risk they are allowed to take. BNP takes a holistic approach when taking risks on mainstream, proven technologies and each investment depends on the risk they’re being asked to take. George gave an overview of the method of innovative technology adaptation in other markets. Risk comes with technology that isn’t proven, only proven in other countries, or isn’t easy to define to investors. Additionally, he would say that any innovative technology that isn’t developing or adapting fast enough becomes a liability with time. Retrofitting to an aged model is a large obstacle to overcome.
Once the panel discussion ended, breakout sessions began. Attendees grouped to identify barriers, best practices, and ideas for valuable federal stimulus packages for the clean energy industry as the US begins to recover from the COVID-19 pandemic. Solutions that were shared by the groups involved regional partnerships between connected states, better regulation structures that don’t hinder innovation, and taking advantage of early scaling (working with universities and engineering firms) to create better practices earlier than dealing with slow adaptation. Investors have trouble backing technology that doesn’t have a proven track record or isn’t easy to understand. Some solutions to combat these problems were green bond and SDG bond education, technology education, using consultants as intermediaries, and better insurance policies that allow for inventors to be innovative.
In closing, Peter introduced Alfred Griffin, President of the New York Green Bank, to provide closing remarks. Alfred gave an overview of the event and shared his insight into insurance companies taking on risk, noting that some insurance companies have inherent expertise in these technological areas and can better define innovation prospects. Alfred also highlighted the New York Green Bank’s accomplishments which crossed the $1 billion investment threshold while still having $500 million in capital. Looking forward, New York Green Bank will continue its sustainable focus and learn how to be most impactful during the COVID-19 crisis. They just got approved to be a PPP loaner in June and are expecting to do secondary debt financing which will expand their ability to finance first of a kind scale-up technologies. Alfred is excited to see policy in New York favor clean energy and decarbonization and the market positively reacting to it.