Green Energy Funding Gets Further Backing from a Tech Giant and Continues to Raise Questions for Investment Security and Technological Advancement
As far as Energy funding trends go, 2016 has been an interesting year. With natural gas prices lowering significantly, we would typically expect the renewable market to decline. This is not the case thus far for the current calendar year. Actually, with the help of a major contributor, the renewable energy’s technology sector has received a sizeable contribution from none other than tech heavyweight, Bill Gates.
Mr. Gates presented a commitment of 2 billion dollars to funding renewable energy sources, which lends a hand in proving that the tech industry will definitely play a huge role in the continuation of renewable energy efforts. Essentially, the commitment from the Microsoft founder is for funding wind energy, which is currently regarded by most as the cleanest form of harvested renewable energy because there is no fuel intake to power the turbines. However, funding the wind fields and equipment is half of the battle, with the other half in storage and distribution.
While as many as 9 states have reported the usage of wind/green energy to represent up to 20% of the total power in those states, a global solution is still developing. With an understanding that this is the answer for the future and success of saving our environment and helping to boost our economy, it seems odd that the necessary questions to further the development of these programs, starting with funding challenges, are not being addressed at the moment.
Although funding is up for 2016, investments have minimal protections for contributors and many aren’t really structured as well as they should be. A general agreement when one invests in energy funding (typically wind energy) is referred to as a PPA or Power Purchase Agreement, which basically ensures that a contribution is to be protected by an agreed upon stabilized return for the investor.
Now, herein lies the problem. Wind energy is currently being harvested at steady rates, while ways to harvest, store the energy, and distribute the energy for usage lags far behind. So what happens to someone’s investment in energy production that essentially can’t be stored for use, or is only being used 20% of the time? How are they protected? Also, could answering these questions and addressing the accounting elephant in the room attract greater investment in clean energy, ultimately helping to speed the development of storage and distribution solutions?
Many companies aren’t alone in asking very similar questions. A major energy consulting company, Opportune LLP, weighs in on some of the concerns with funding wind energy by asking some hard questions: “Does the PPA have a notional amount causing it to be a derivative? If so, how is the notional amount determined as the volume is often contingent on how much power the wind farm produces?” As more questions arise in approaching ROI, it seems that we are slowly moving towards the day where we can harvest clean energy smoothly.
While I’m certain Mr. Gates has a detailed approach for obtaining his return on investment, there is fear that many smaller investors, such as homeowners with solar panels, businesses, etc., may be falling into a grey area of long-term commitment that they most likely won’t see a return on for a very long time.
As nature would predict, things tend to naturally work themselves out over time. Hopefully the larger investors and companies at the helm of structuring these deals will pave the way for more efficient operations, from harvesting the energy, to storage and dispersing it to various grids, to figuring out the aspect of investor return so that everyone wins. While it’s uncertain how this will be achieved, it’s exciting nonetheless to think we will be one step closer to a greener existence and prospering from it.