Yet another renewable financing model
Tuesday, February 28th, 2006Private investment firm Renewable Ventures LLC of San Francisco has created a $100 million (U.S.) fund dedicated to helping businesses, government agencies and non-profit organizations take advantage of solar technology without having to pay the upfront costs. The fund essentially finances, owns and operates the solar assets, and the organization agrees as part of a 20-year contract to pay a fixed price for that renewable solar power, or some other rate that has been adjusted lower that the existing utility rate. Over time, the organization is sheltered against price hikes and the institutional investors behind the fund will get a low-risk return — somewhere in the high-single to low-double digits — partly because of associated tax benefits, CEO Matt Cheney told Red Herring.
The fund hopes to have 70 projects totalling up to 20 megawatts of solar capacity committed within the next half year. Cheney told the magazine that the model is not unlike leasing a car, and customers would similarly have the option of buying the system.
This is a great idea, and in no way original. There’s no reason why a similar private fund couldn’t be created in Canada, or even a government-created fund couldn’t head in the same direction, possibly expanding the program to include solar thermal and geothermal energy projects. There’s also no reason a utility such as Toronto Hydro or Enbridge Gas couldn’t go in this direction (actually, Enbridge has flirted with the idea), either on their own or in partnership with municipal governments.
The business models are there, and there’s money to make, particularly on the thermal side. You’ve got low risk for investors, you achieve government objectives regarding renewable energy, and end users have price stability and eco-bragging rights.
Tyler Hamilton is editor-in-chief of Corporate Knights magazine and a business columnist for the Toronto Star, Canada's largest daily newspaper. In addition to this Clean Break blog, Tyler writes a weekly column of the same name that discusses trends, happenings and innovators in the clean technology and green energy market. This blog is a personal project started in April 2005. It is not an official blog of the newspaper.
