REFF West: Putting the 'Green' in Green Technology
By Sam Smith
If you want to select a forum to discuss big money investments, the Palace Hotel in San Francisco is the place to meet. It was in fact the location of the 2nd annual Renewable Energy Finance Forum (REFF West), held September 29-30, 2009. The stated goal of this conference was to bring together high-level renewable energy financiers, project developers and policy makers in a single forum to assess the state of progress of programs to enhance the availability and quality of renewable energy in the US.
The keynote speaker was the Honorable Gavin Newsome, Mayor of San Francisco, and announced candidate for Governor of California. San Francisco is very progressive in the area of alternative energy programs, with an aggressive program to increase the percentage of electricity provided from alternative sources. This includes a proposed tidal generation program(1) slated to be installed beneath the Golden Gate Bridge. Mayor Newsome emphasized the need to think globally, but to act locally by implementing affordable alternative energy programs now rather than waiting for future promises.
REFF West was organized by the American Council On Renewable Energy (ACORE) and euromoney energy events. These organizations are to be commended for the format, speakers and broad spectrum of attendees at this conference. Each of the sessions was started with a keynote speaker highlighting the need to address issues facing the alternative energy industry as more of the world is industrializing and demand for energy is increasing. This has to be balanced against issues related to perceived global warming, air pollution and competition for resources.
The first group to take the stage addressed government issues and policy drivers that enhance or limit expansion of alternative energy programs. They highlighted the recent federal legislation that provides billions of dollars to a variety of areas from basic research through implementation. A theme expressed by this group, and carried throughout the conference, is that the government is looking for near-term success, not long-term investment. The performance goals established for 2010 and 2015 will require extensive fielding of current technology, not additional research and development.
Next up was an assessment of the global financial markets in relation to renewable energy projects. Several of the speakers pointed out that currently investments in Europe and Asia (primarily China) were much greater than in the US. This was displayed both in actual dollars and as a percentage of GDP. It was recognized this trend was changing as US investment increases, however, investment needs to increase at a faster rate if the US is stay competitive. One manifestation of this was the fact that although we have several US developers of Lithium Ion batteries; they are all currently using overseas factories to manufacture cells. Because of the status of oil and coal reserves (coupled with the desire for reduction of carbon), renewable energy is increasing in importance.
The next panel addressed the sources of funding to develop and deploy renewable energy projects. Because many of these technologies are mature and in cost effective use, the focus was on better ways of funding deployment. Coming from the research and development community I was impressed at the logical and clear presentation of how debt financing is a very viable approach to large-scale projects. The next panel focused on the financing of solar projects. Of special interest were the cost/benefit analysis required and the impact of distance from existing grids on cost.
The last panel of the first day highlighted the importance of the relationship of information technology and renewable energy projects. The term “Smart Grid” was used extensively to highlight how active monitoring and management of grid status and customer demand leads to greater efficiency. One of the challenges of increased use of renewable energy is the irregular energy delivery pattern. The wind tends to blow more at night when demand is down and solar collection is affected by rain and cloudy days. Active grid management will increase in importance as more renewable energy programs are implemented.
Day two was launched with keynote speeches on increasing electrical demand. The first panel was dedicated to renewable electricity. With the stated goal of doubling the output of renewable electricity within the next three years it will be necessary to complete a number of large-scale projects across the country. Extensive discussion was devoted on how these new generation sources would be integrated into the existing grid. There was some skepticism expressed that we would achieve the desired goals, especially the 2010 targets.
The next panel was of specials interest as it laid out the differences between venture capital and private equity. The panel members did a very effective job of outlining the various parameters that investors look for in energy projects. The scope of the projects were important – a $100M project to deploy solar arrays is easier to fund than a $5M project to improve solar array performance. Fund seekers need to have a clear business plan with reasonable projections on revenue streams and return on investment dollars. If you are a technology developer seeking funds, you need to be able to show you can demonstrate the viability of your technology with the minimum investment – no frills. The successful A123 initial public offering (IPO) was very encouraging to this community.
The next two panels, one focused on the Utility & Energy Industries and the other a CEO Roundtable, challenged the existing industry to look past the current business model (regional monopolies with government regulators setting investments and rates) to a more innovative and cooperative model. Integration of more renewable energy sources will be disruptive to the current business model and is going to require state regulators to be part of the solution. It will be a challenge to a business that has had few changes in past 80 years.
The two days were very educational, I was impressed by the challenges that were identified and even more impressed with the corporations and individuals who are aggressively seeking solutions. The financial community is ready to fund reasonable projects that are based on a strong business plan to become profitable in a reasonable timeframe. Special recognition needs to be offered to Michael Eckhart, President of ACORE, for his enthusiasm and management of the conference schedule, which resulted in a tremendous amount of information to be presented. If you are interested on how the US is going to fair in the global renewable energy market, you need to attend these conferences.
Sam Smith is the managing partner of EV World & Associates LLC a professional consulting partnership with management, marketing and engineering expertise in sustainable transportation technology; with offices in Orange Country and Santa Barbara, California; Omaha, Nebraska; Cincinnati, Ohio, and Blacksburg, Virginia.
(1) EV World & Associates, LLC is developing a hydrokinetic power generation system called HyPEGS through Hydrokinetic Lab, in association with the Oregon Institute of Technology.
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