A Roosevelt Rides the Wind
By EV World
The great-grandson of President Teddy Roosevelt recently addressed a luncheon gathering of hundreds of investment bankers, venture capitalists and renewable energy developers and manufacturers during the 2005 Renewable Energy Finance Forum (REFF) in New York City's Waldorf Astoria Hotel, organized by ACORE and EuroMoney.
He began with a humorous aside about the Lord appearing to Moses and telling him that He had good news and bad news for the reluctant leader of the enslaved Israelites. Moses asked the Lord for the good news first, to which the Almighty responded that He would bring a series of plagues on the Egyptians from locusts to the death of their first born. He would also cause the Red Sea to swallow up Pharaoh's "host", allowing the Israelites to safely escape their bondage and begin their trek towards the promised land.
Moses was elated, but asked the Lord what was the bad news. The Lord is alleged to have responded -- at least in Theodore Roosevelt IV's "Unabridged King James" version of the Bible -- "Moses, you're going to have to write environmental impact statement".
That remark set the stage for the purpose of his talk, the embattled Cape Wind project in Nantucket Sound, which his investment banking firm, Lehman Brothers now represents. From his perspective, the successful development of this project is analogous to the starting gun of a race to build more offshore wind projects in North America; and while he understood the audiences desire to hear how the project is going to be financed, he explained that he would limit his remarks to the "political shoals" the project is carefully navigating at the moment. He hoped that either himself or Cape Wind CEO, Jim Gordon would be able to discuss the details of project financing at the 2006 REFF.
He remarked that financing any project needs to be accomplished "quietly and soberly" and not in the spotlight of rough and tumble politics.
"And quite frankly, the economic climate is so right for this project, that the purely financial aspects of this story are the least of it".
"As the Harvard Business review wrote years ago", he continued, "those who believe that ecological disaster will be averted, must also appreciate the commercial implications of that belief. Over the next decade, sustainable development will constitute one of the biggest opportunities in the history of commerce.
"Technological advances, in addition to anticipated demand pressure on fossil fuels, is making wind power cost competitive, which the Boston Globe wrote is, 'a conservative hedge bet for a future that could put a premium on non-polluting power sources'. And wind, as everyone here knows, is a large resource without constraint in terms of supply or pollution.
"It is estimated that the wind resources off the continental shelf in the eastern United States could supply most of the energy in that region and significantly reduce greenhouse gas emissions in the near term. Cape Wind will be a first step in that direction.
"So needless to say, Lehman is not only… confident that this will get done, we are also extremely enthusiastic and grateful for this pioneering opportunity to have our foot in the door of an energy industry that is, in our view, inevitable and a public good.
"In fact, it is beginning to look to me that doing the right thing in the future, will also be the profitable thing. What will also be just as important as financing future wind projects, however, will also be the political and social will for moving forward… and that is far less predictable than the financial markets, but it is a necessary underpinning for financial success. New technologies must depend on the government to break down market barriers and overcome obstacles, such as the capital investment gap between R&D and deployment. We want to see Congress, for instance, renew the Production Tax Credit for wind power and pass an energy bill that includes a carbon cap.
"In short, social, political consensus building requires just as much, if not more management transparency and perseverance in getting a deal done in the capital markets. As one commentator put it, 'Whether or not the possibility of displacing much of the fossil fuel power on the east coast of the United States with wind power is realized will depend on public acceptance and the policies for project evaluation and permitting'".
Roosevelt noted that despite being located in one of the most liberal states in the Union, the Cape Wind project has garnered significant opposition.
"It is inconceivable to me that a low-lying coastal landscape such as Cape Cod, one that is particularly vulnerable to rising sea levels due to climate change, that this project would not be considered a lifeline; and quite frankly, a badge of honor and a civic duty fulfilled. As a homeowner on Martha's Vineyard, I find the specter of sea level rise far more threatening to the permanence of our view-shed than the barely thumbnail-size shadows of windmills on the distant horizon.
"As a Republican, I have been dumbfounded by the pursuit of an irrational federal energy policy on the part of conservatives in Congress and The White House. But my astonishment is now confounded by the irrational rejection by self-proclaimed environmentalists in the Cape Cod community for locating a clean, renewable energy source in their region.
"All that being said, and my annoyance being vented, it is probably far more important to all of us to come to terms with what might be some of the sources of our responses, rational and not-so-rational, to the changes that a carbon-restrained future demands of us.
"It seems as though it has always been with us, but it has been but twenty years since we started talking about globalization. Early in that discussion, the World Bank began to note in some of its publications that there was a countervailing trend accompanying the growing homogenization and unification of world economies and cultures. There was often a heated defense of the sovereignty of the local and regional, sometimes in ways that seemed oddly counterproductive to their self interests.
"In this case, for instance, wind power, which is far more labor intensive than other power sources, will create good, long-term jobs in the region, as well as positioning Massachusetts to become a leader in a new technology".
Roosevelt noted that many of the same arguments used to criticize globalization are echoed in the opposition to wind power, especially the perceived loss of sovereignty. He noted that a recent study of local opposition to wind power in the United Kingdom observed that "three quarters of (wind power) proposals failed because industry did not 'appreciate the important links between landscape, memory and beauty in achieving a better quality of life'. The Brits call this environmental split the 'Macro-Micro Schism' where what is good for the global landscape is considered abstract versus the perceived tangible negatives through the immediate experience of home.
"I know this discussion strikes a financial group as muddying the water with a needless excursion into externalities, a discussion more suitable perhaps to eco-therapists or New Age shamans rather than financiers; and you have a point. But it isn't good enough. As Paul Drucker, the father of modern corporate management theory often stated, corporations cannot be cavalier about being sanctioned by society as legitimate institutions. Externalities must be incorporated into a company's business plan, or view-shed in order to 'fulfill automatically the accompanying social obligations in the very act of ceding it's own self interest'. Transparency and accountability are not only the foundation of a rational marketplace, they are the foundation for engendering community trust. I think we can expect opposition to be always with us just by virtue of today's society, where our citizens feel they can have it all without paying a price for that. The question is whether or not we allow opposition to swamp important projects.
"Cape Wind is an excellent model in this regard as we go forward. While Cape Wind has to face one of the most staggeringly well-financed oppositions that I have ever encountered, Jim Gordon's staff has kept pace with unsound criticisms and legitimate concerns leveled at the project. Jim has made an investment in public relations capacity by hiring community relations and communications professionals early in his staffing efforts. In fact, the bulk of his investment has been spent, as described by one publication, on environmental impact studies, erecting a wind measuring tower on site and an expensive public relations campaign.
"Ongoing and consistent communications that avoids blaming local opponents or holding their expressed values in contempt, as tempting as that may occasionally be, demonstrates a commitment to transparency and inclusion. It means that there is at least a chance for the community to feel enfranchised, rather than disenfranchised by the process.
"We all need the Cape Wind project to succeed, and Jim has brought the right resources and the right frame of mind, in that regard. I suspect that many more success stories will follow Cape Wind and in our next years we will spend time with glasses raised in toast to our mutual accomplishments".
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