MONDAY STUDY: Smart Money Keeps Moving To New Energy

Expectations for Renewable Energy Finance in 2020-2023; Survey of Leading Financial Institutions and Developers $1T 2030 Campaign Progress Report

July 14, 2020 (American Council on Renewable Energy)

Executive Summary

ACORE launched its $1T 2030 campaign in 2018 to achieve $1 trillion in private sector investment in U.S. renewable energy and enabling grid technologies by 2030, while advocating for policy reforms and market drivers to help meet this goal. This report assesses progress on the campaign and presents the results of new surveys of prominent financial institutions and renewable energy development companies. The surveys assess near and mid-term confidence in the sector and speak to the impact of the COVID-19 pandemic on business and investment strategies.

The U.S. has cumulatively attracted $125.1 billion in private sector investment in renewable energy and enabling grid technologies since the launch of the $1T 2030 campaign in 2018, reaching one-eighth of the total $1 trillion campaign goal. To achieve the 2030 objective will now require an average of $87.5 billion in annual private sector investment through 2029 – an annual increase of 28% over the 2019 investment level.

Private sector investment in the U.S. renewable energy and enabling grid technology sectors reached its highest level to date in 2019 at $68.4 billion. The 21% increase over 2018 investment was driven by phasedown schedules for the federal tax credits, expanded state renewable energy standards, growing cost competitiveness, and increased demand from corporate buyers, residential consumers, electric utilities and investors focused on sustainability.

However, the pandemic has presented new challenges for renewable energy and energy storage investment. COVID-19 has led to the loss of almost 100,000 jobs in the renewable energy sector as of June 2020, strained renewable energy project financing and caused innumerable project delays, reducing renewable energy capacity expected to come on line in 2020 by 21%.

click to enlarge

ACORE surveyed prominent companies engaged in the utility-scale renewable energy sector to determine the extent of COVID-19’s impact on renewable energy finance and investment. While companies are experiencing significant headwinds in 2020, surveyed renewable energy investors remain as confident in renewable energy growth over the next three years, on average, as they were in 2018-2019. They are similarly confident in expectations of rapid energy storage growth. In both sectors, the strong investor confidence is mirrored in high confidence levels from renewable energy developers.

Over half of surveyed financial institutions plan to increase their investment in renewables by more than 10% in 2020 compared to 2019. Surveyed developers report plans to either maintain or increase their level of development of renewable energy projects in 2020 compared to 2019.

Investors consider the U.S. to be an attractive venue for investment compared to leading countries like China over the next three years. The U.S. has been slowly catching up to China by steadily increasing its private sector investment in renewables, while investment in China has been decreasing since 2017.

click to enlarge

Most surveyed investors and developers do not expect the COVID-19 pandemic to have a long-term impact on their business plans, but some are experiencing short-term difficulties with financing and project delays.

79% of investors and 50% of developers do not expect their business plans to change significantly because of COVID-19. Over the next three years, the majority of respondents expect no quantifiable change or report it is too soon to tell. Half of the investor respondents report that they have become more flexible with project sponsors to help ensure projects can be completed.

However, two-thirds of surveyed developers report difficulty in securing financing or offtakers for projects, and some cite project delays of up to 12 months.

Half of the investor respondents report that they have become more flexible with project sponsors to help ensure projects can be completed.

Both investors and developers expect a decrease in tax equity financing because of COVID-19, which could have short- and longterm impacts on renewable energy projects. Notably, three-quarters of the surveyed tax equity investors predict a decline in tax equity investment.

click to enlarge

To support achievement of the $1 trillion by 2030 objective, ACORE is strategically deploying its resources to promote key policy reforms and market drivers. We are pursuing the following priorities in 2020:

COVID-19 Response: ACORE advocates for policy solutions to help the sector recover from the COVID-19 pandemic, including measures to facilitate the monetization of renewable energy tax credits and a delay in their phasedown schedules.

Climate Policy: ACORE focuses on identifying the most viable suite of climate policies and analyzes their impact on renewable energy growth and investment, including a federal high-penetration renewable or clean energy standard, a technology-neutral tax credit, and carbon pricing.

Grid Advocacy: ACORE advocates for cost-effective investment in transmission and distribution infrastructure, including a new Macro Grid that better connects population centers with areas richest in regional resources, and a less balkanized and fairer electricity marketplace to promote greater access to and delivery of renewable power.

Energy Storage: Energy storage and other grid-enabling technologies have the potential to transform the electricity system and fundamentally change the way we think about energy. ACORE promotes their growth through advocacy for a standalone energy storage tax credit and other supportive policies, market reforms and financing solutions

Environmental, Social and Governance (ESG) Scoring: ACORE works with its members to increase standardization, transparency and use of material indicators in ESG disclosure and scoring processes through specific recommendations and regular outreach to the ESG community…

click to enlarge

Progress on ACORE's $1T 2030 Campaign…Investment in 2019…Drivers for Growth…New Headwinds in 2020…Market Outlook: Sector Confidence and Impact of COVID-19 on Business Strategies…Sector Confidence…Impacts of the COVID-19 Crisis…Evolving Capital Stacks and Financing Structures…

click to enlarge

ACORE'S $1T 2030 CAMPAIGN PRIORITIES

To support achievement of the $1 trillion by 2030 objective, ACORE is strategically deploying its resources to promote key policy reforms and market drivers. We are pursuing the following priorities in 2020.

COVID-19 Response: ACORE advocates for policy solutions to help the sector recover from the COVID-19 pandemic, including measures to facilitate the monetization of federal tax credits and a delay in their phasedown schedules.

Climate Policy: ACORE focuses on identifying the most viable suite of climate policies and analyzes their impact on renewable energy growth and investment, including a federal high-penetration renewable or clean energy standard, a technology-neutral tax credit, and carbon pricing.

Grid Advocacy: ACORE advocates for cost-effective investment in transmission and distribution infrastructure, including a new Macro Grid that better connects population centers with areas richest in regional resources, and a less balkanized and fairer electricity marketplace to promote greater access to and delivery of renewable power.

Energy Storage: Energy storage and other grid-enabling technologies have the potential to transform the electricity system and fundamentally change the way we think about energy. ACORE promotes their growth through advocacy for a standalone energy storage tax credit and other supportive policies, market reforms and financing solutions.

ESG Scoring: ACORE works with its members to increase standardization, transparency and use of material indicators in ESG disclosure and scoring processes through specific recommendations and regular outreach to the ESG community.

Tweet