ISES 2013 - Day 1 - Dr. Satyajit Bose (Earth Institute at Columbia University) - Investments for Sustainable Development

603 views

Published on


The transition from fossil to renewable energy demands enough capital to develop and release new solutions. This means that investors are needed. The last years, private investors in clean energy have experienced a rising demand in the market. This session will give the participants thoughts on how we can make sustainable investments profitable.

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
603
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
6
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

ISES 2013 - Day 1 - Dr. Satyajit Bose (Earth Institute at Columbia University) - Investments for Sustainable Development

  1. 1. Investmentsfor SustainableDevelopment: Can SustainabilityMake BusinessSense? Dr. Satyajit Bose June 13, 2013 ISES Panel
  2. 2. What sectorscompriseGreen Investments? Innovative technologies designed to optimize the use of natural resources and reduce environmental impact: Cleantech • Power generation: solar, wind, hydro, geothermal, biomass • Energy storage: batteries, hydro, flywheels Resource Management • Water infrastructure • Green buildings • Energy efficiency, demand management Transportation Infrastructure • Bus rapid transit, railways, bike sharing
  3. 3. Green Investment Challenges Why is clean energy so difficult to finance? This portfolio of innovative technologies requires: • Significant upfront capital: $46 trillion in incremental investment by 2050 (Source: IEA) • Some technologies early in the heuristic learning process • Challenging cash flow profiles • Numerous, complex and sometimes unstable incentives • Regulatory uncertainty on monetization of carbon externality
  4. 4. Recent Decline in Investment
  5. 5. Oil Price Context $- $20 $40 $60 $80 $100 $120 $140 $160 jan-2004 mai-2004 sep-2004 jan-2005 mai-2005 sep-2005 jan-2006 mai-2006 sep-2006 jan-2007 mai-2007 sep-2007 jan-2008 mai-2008 sep-2008 jan-2009 mai-2009 sep-2009 jan-2010 mai-2010 sep-2010 jan-2011 mai-2011 sep-2011 jan-2012 mai-2012 sep-2012 jan-2013
  6. 6. Forms of Financing Project Financing • Off-balance sheet funding for large infrastructure and pooled small distributed capacity • Predictable cash flows • $228bn (85%) of new investment in 2012 (Source: BNEF) • Up 7% year on year Balance Sheet Financing • Venture capital, private equity and R&D funding for prototypes and demonstration technologies • Small scale, with minimal and highly uncertain cash flows • $40bn (15%) of new investment in 2012 (Source: BNEF) • Down 15% year on year
  7. 7. Investor Funding for Innovation Drying Up New Investment in Clean Energy ($ in billions) 2011 2012 Change Venture Capital 6$ 4$ -33% Corporate R&D 13$ 15$ 15% Government R&D 13$ 15$ 15% Private Equity 3$ 1$ -67% Public markets new equity 12$ 5$ -58% 47$ 40$ -15% Asset finance 146$ 149$ 2% Small Distributed Capacity 74$ 80$ 8% Reinvested (6)$ (1)$ -83% 214$ 228$ 7% 261$ 268$ 3% Source: Bloomberg New Energy Finance
  8. 8. Investment Drivers for Corporate Sustainability Green Consumers • Form of product differentiation, price discrimination and consumer loyalty Strategic Over-compliance • Pre-empt regulation • Shape regulation to raise rivals’ costs Green as a Signal • Employee recruitment and retention • Investor relations and lowered cost of capital Government failure • Territoriality of jurisdiction • Capture by interest groups
  9. 9. Investment Appraisal Standard Methods: • Payback • Return on Investment • Net Present Value/Internal Rate of Return • EROEI Enhanced Methods: • Monetization of uncertain or intangible benefits • Real option analysis • Strategic leadership potential
  10. 10. The Value of Options Real Option Analysis: Option values in alternative energy generation • Dual sourcing • Demand management • Energy storage • Interconnection of grids
  11. 11. Government and Multilateral Assistance • Renewable portfolio standards and/or feed-in-tariffs • Innovation grants • Subsidies • Clean energy funds with loans and mezzanine financing • Carbon pricing
  12. 12. Promising Developments Crowdsourcing • JOBS Act in USA Open Data Initiatives • Green Button Initiative in USA Small Distributed Capacity Business Models • Turnkey retail solar installations Demand Management • Internet of things, Efficient peak use pricing

×