Friday, February 5, 2010

Green Energy Act Finance Forum

‘The Green Energy Act (GEA) presents a significant opportunity for the financial sector to participate in funding the growth of renewable energy production in Ontario. In order to leverage this opportunity, and facilitate a large-scale deployment of renewable energy infrastructure, a number of financial instruments (equity, debt, venture), financial institutions (pension funds, banks, private equity, mutual funds) and other sector players (suppliers and operators) need to be engaged.’ Attracted by this potential, the Green Energy Act Finance Forum, presented by MaRS, the Green Energy Act Alliance and D&D Securities, drew a capacity crowd of 300 last Friday at the MaRS Discovery District.

In introducing the first panel, European Perspectives and Best Practices, Tom Rand, CleanTech Practice Lead at MaRS, suggested that Europe has provided a clear, credible, long term commitment to the clean tech sector and that’s what it takes to attract large amounts of capital.

Jerome Guillet, Head of Energy at Dexia Credit Local, discussed some issues in project finance, including regulatory risk, construction risk and financeability. He viewed price stability as the single most important factor in financing renewable energy projects, as these projects require a significant expenditure up front, which is then recouped from a revenue stream over 15 -20 years. Second was priority interconnection of the project to the grid to eliminate volume risk. And finally, a consistent long term framework with a suite of polices supporting a fixed price, a fair ROI rationale and the assured interconnect. “What attracts capital? Stability and simplicity.”

TLC – that’s how it’s framed at DB Climate Change Advisors. Covering themes similar to those of Mr. Guillet, Nils Mellquist stated that investors want Transparency, Longevity and Certainty, in order to reduce the cost of capital and make financing more achievable. Deutsche Bank has produced a research paper Paying for Renewable Energy: TLC at the Right Price which sets out, among other things, their view of the optimal features of an Advanced FiT. ‘Germany remains a leading example, and in North America the province of Ontario has emerged with a particularly strong policy.’

Mr. Mellquist stressed that the Feed in Tariff should not stand alone, it should be tied in to other policy initiatives. “Carbon markets that are robust, hedgeable and liquid are still some way off. Until we get there, we need policy to help.”

“When you have a policy goal, a FiT and TLC, you will get an investment response.”

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