GreenBiz: How to infuse distributed generation with institutional capital

by Thomas Byrne, CEO, CleanCapital

This article was originally run in GreenBiz.

Last month, I spoke at the 17th Annual Wall Street Green Summit, an event focused on exploring the latest developments in clean energy finance. The summit included industry experts who discussed an array of exciting developments throughout the renewable energy sector. My presentation focused on capital market strategies in distributed generation and wanted to share some highlights.

First, some perspective. Clean energy has grown rapidly in the last decade, up to 18 percent of total energy deployment from 9 percent in 2008. But it remains a small fraction of overall power generation worldwide. In the United States, coal and natural gas account for more than 60 percent of electricity generation.

A fundamental shift in investments is required

Despite the rapid growth, the current pace is not enough to reach global climate goals. The capital needed to achieve Paris Agreement goals is significant.

The International Energy Agency estimates that to meet the goal of keeping temperature increases this century below the 2 degrees Celsius goal, renewable energy capacity must grow to 4.53 terawatts by 2030. Some estimate that some $2 trillion per year in investments by 2030 (PDF) is required to achieve this. With only 0.4 percent of institutional capital currently in the space, a fundamental shift is required. Institutional capital needs to flood into all segments of clean energy: transportation, energy efficiency and power.

There are positive signals. Despite the U.S. decision to back out of the Paris Agreement, 256 investors with $28 trillion in assets under management have signed onto the Climate Action 100+ Sign-on Statement, including CalPERS, Manulife and many other large institutions. BlackRock’s Larry Fink promised "institutional activism" by mandating climate-friendly management initiatives. And more than 800 large institutional investors have committed to divesting from fossil fuels in recent years.

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