Net Zero Cities: Funding the future of clean energy

Funding for clean-energy startups and innovators hasn’t yet reached the levels needed for Front Range cities to achieve net-zero status. Despite the creation of new grant programs, the emergence of Green Banks, creative fundraising methods by companies and institutional investors beginning to enter the market, much work still needs to be done.

That was the message from the Funding Innovation panel at BizWest’s Net Zero Cities summit Wednesday morning, moderated by Quinn Antus, executive director of the Signal Tech Coalition.

“The current scale of clean-energy investment for well-understood technologies is falling well short of what is needed to combat climate change,” said panelist Paul Scharfenberger, executive director of the Colorado Clean Energy Fund.

That shortfall manifests itself in numerous ways. Panelist John LoPorto, president and CEO of Starfire Energy, said his company has little difficulty getting project or research and development investments from markets in Asia and the European Union, but that investments from the U.S. are much harder to come by.

“There’s really no challenge securing capital in markets committed to [clean-energy investment] at a governmental level,” LoPorto said. “In the domestic market, it’s not really that easy. There’s a feeling of uncertainty every four years that a new administration could change their view on clean energy.”

Another issue is that small clean-energy businesses, as well as small and rural clean-energy projects, are often overlooked by investors, Scharfenberger said. Small businesses don’t always have the best credit. Some local clean-energy products don’t have the most attractive potential return. They can also be expensive to underwrite. The payback periods for clean-energy projects are often longer than the typical loan term. These are all market barriers, Scharfenberger said, that limit private capital flows into clean-energy projects that could make a big difference on the local level.

Green Banks such as the Colorado Clean Energy Fund are one potential solution to this. They exist to direct capital to precisely those projects Scharfenberger said investors sometimes avoid. Green Banks provide services such as credit enhancement, loan-loss reserves, aggregation of resources for smaller projects, technical assistance and co-investment in projects with lower potential return.

Green Banks also leverage and recycle capital. In less than 10 years, Scharfenberger said, 15 Green Banks in the U.S. have generated $7 billion in investments. Twenty-two more are in development. A 2019 white paper by the Coalition for Green Capital stated that a national Green Bank with $35 billion in capital would be able to leverage $1 trillion.

“We can do better when it comes to lending to a wider portion of our population,” Scharfenberger said.

State grants could also be an attractive option to local businesses and smaller projects. Panelist Diego Lopez, executive director of Northern Colorado Clean Cities, said that the state is launching two new grant programs this month: Alt Fuels Colorado on May 3 and Charge Ahead Colorado on May 17. The former program will help fund the purchase of electric fleet vehicles; the latter will go toward fleet charging stations or public charging stations at businesses, Lopez said.

For larger companies that operate on a global scale, Starfire Energy provides an innovative example in how to secure funding. The company created a carbon-free method of hydrogen storage and transport and manufactures its technology in a scalable, modular, repeatable way. LoPorto said that because of the capital-intensive nature of its business, Starfire intentionally sought out large, international institutional investors, then fostered relationships among its investors and integrated them into their production chain.

Two things would bolster the market further, LoPorto said: big energy companies investing more aggressively in clean energy, and long-term policy guidance from the federal government.

On the former count, institutional investors and big energy companies are starting to move into clean energy in bigger numbers, said panelist Ramsay Huntley, sustainable finance strategist for Wells Fargo. Huntley said that energy companies such as Xcel are beginning to lead the transition to net-zero, and that big banks are starting to conceptualize what it would take to finance the infrastructure to deliver clean power.

“What we see with investors writ large is a real interest in moving into the [clean energy] space,” Huntley said. “When we see green bonds issued, there is higher investor interest in those, especially from private equity, institutional investors and sovereign wealth.”

© 2021 BizWest Media LLC

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