Global CEO, Energy Finance
Bridging the Energy Funding Gap with Private Financing
According to the American Society of Civil Engineers (ASCE), the United States has an infrastructure investment gap of $177 billion. Moreover, the clean energy sector, in particular, needs significant investment. Bloomberg New Energy Finance (BNEF) reported that investment in clean energy technologies was down 17% in Q1 2017 compared to 2016. Greater use of smart financing techniques, along with new business models, can bridge these gaps and help the country transition to a more efficient energy system.
While distributed energy systems undoubtedly have a role to play in building tomorrow’s energy system, it’s important to maintain a balanced perspective. Since solar and wind energy are not always reliable, utilities continue to invest in more flexible and efficient natural gas resources. One example of this is the Bayonne Energy Center (BEC) in New Jersey. An equity bridge loan was used during construction in 2010 to help finance the development of the project. This loan proved vital for the project’s construction, which utilizes aero-derivative gas turbine technology and allows BEC to transmit electricity to New York City in less than ten minutes.
On the renewable energy side, projects such as Kay Wind in Oklahoma were supported by $80 million in construction financing. The result was a 130-wind turbine farm that provides enough clean energy to power approximately 100,000 homes annually. As business and economic conditions change, financiers that have the flexibility to switch from debt to equity financing can offer the most value to customers in the energy space.
With public funding for large-scale energy projects likely to remain limited, it’s up to the private sector to take the lead in transitioning to a new energy future. The use of smart financing techniques like development loans, equity bridge loans, and debt or equity capital solutions can help support the country’s vast energy infrastructure needs and close the funding gap.