Renewable Energy Financing: What History Could Teach Us

On 4th October 2012 we hosted and sponsored, alongside Infrastructure Journal, the Offshore Wind Future Financing Forum. So let me try and explain why we think financing off-shore wind projects needs our attention.

To get to a renewable energy-led balance, we need to build a lot more projects over the course of the next decade. This naturally requires significant capital support from utility companies, commercial bank debt, project finance, green banks, European development banks, investment funds… I am sure you get the picture.

But, there is a gap. The current funding models don’t fit the renewable energy world so well. What we need to do is build some confidence around alternative criteria. The income stream for energy is very different when compared to a hospital, bridge or railway, right? We have to bring the cost of low carbon energy to the grid at levels below the cost of high carbon energy. Governments need to put the policy measures in place to support this change; all the tiers of the supply chain should be robust, the grid must be stable 100% of the time, and the customers must like the price.

Looking back… to look forward

Just consider this for a moment: we would not be here without natural renewable energy. Early civilisation learned how to capture it and build empires, economies, wealth and productivity out of it. If they could, why can’t we?

If you think about it, the intrepid voyages to discover the world were made using wind power from the Phoenicians, the Pharaohs (Hatshepsut), Marco Polo, Vasco de Garma and Captain Cook. We learned to use wind power to pump water, to create new dry land and irrigate crops, and we used water power to drive machinery and solar power to preserve food, the ancient Chinese used concentrated solar for heat and fire, and native Americans used thermal springs. These guys and girls were true pioneers of their time. They may have been primitive technologies, but for thousands of years we only used 100% renewable energy.

Then came the Industrial Revolution, as depicted so well in the Olympic Opening ceremony earlier this year. We went from burning coke and coal to drive steam to the technologies today where oil and gas, coal, coal gasification, lignite and nuclear energy (which was once upon a time going to be so cheap that it wouldn’t make sense to even bill it) have become the mainstay of our power supply… I could go on.

Can history repeat itself?

So here we are trying to turn back the clock with new technology to allow our cars to run on wind power, to drive machinery through tidal power, to feed the grid through solar power. The technology can appear challenging, the costs can seem ominous and risks unknown, so funding that gap and managing the risks with a viable business model is a huge undertaking. We’ve done it once before, but the question is can we do it again?

About Michael Buckle

Michael is an Executive Director of Global Markets and leads Willis' Renewable Energy practice. Based in London wit…
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