“If you are not at the table, you are on the table,” said CleanCapital Co-Founder Jon Powers during the second day of VERGE Hawaii, concluding that proactive engagement with regulators and policy makers is necessary to ground the discussion of financing clean energy.
Financing as a topic may not be the most dynamic of topics, but attendees were drawn to the “Bridging the Financing Gap for Clean Energy” afternoon breakout session on Wednesday, filling the Hilton Hawaiian Village conference room eager to discuss financing challenges as “Hawaii creeps closer to its 100 percent renewables goals.”
The panel included (pictured, from left) Powers, Hawaii Green Infrastructure Authority Executive Director Gwen Yamamoto Lau, Ulupono Initiative Managing Partner Murray Clay, Clean Energy Works Principal Holmes Hummel, and moderator Paul Carp, director of research and senior analyst for GreenBiz Group.
The panelists observed that the market’s commitment to clean energy appears to be sound. As evidence, Power’s pointed to recent history: when President Donald Trump declared last year the United States would exit the Paris climate deal, many of America’s largest corporations responded by committing to the agreement anyway, aiming to pursue cleaner energy and reduce emissions on their own.
But there is a major transformation underway in the area of finance, not just as it applies to clean energy but everywhere. Technology is “disrupting,” panelists explained. For example, options provided by PayPal and crowd-funding were not even possible 10 years ago. Considering that approximately 64 percent of clean energy operations consist of “soft costs,” simple enhancements to technology offer great opportunities to streamline and reduce overhead.
“The first law of project finance is that any reasonably certain stream of cash flows can be financed,” Clay said. He said the funding is there, but the process can be perceived as risky and time consuming (hence the afternoon session topic).
The good news, he added, is that over the past several years, there has been some improvement in the curtailment of energy production and accelerating power purchase agreement (PPA) negotiation and Public Utilities Commission (PUC) approval.
However, while the competitive bidding process has been improved and expedited in some cases, added requirements for the PUC to consider environmental impact can drag the process out. There is also room for improvement in the areas of addressing the complexities and delays in permitting process and in electric utility procurement of new energy resources, as well as establishing time limitations on bilateral PPA negotiations.
To illustrate how these factors can extend the time it takes to implement projects, Clay shared how Ulupono’s supportive role in the Honolulu Seawater Air Conditioning project began years ago as a minority investment, but today the firm is now a majority investor as others have come and gone. One reason, Clay said, is that other investors may not have known how long it takes for projects in Hawaii to move forward.
The Honolulu-based impact investment firm has found that engaging stakeholders, including government and regulating agencies, is essential to doing business. Now nearly a decade old, Ulupono in its early days typically stayed out of public policy and focused on its operations as a private equity firm on impact investing.
“But decisions that regulators and policy makers are making are so critical, they can take all kinds of stuff off the table – or put things on the table – and so if you don’t have a seat at the table, you can’t get anything done,” Clay said. “And so we started getting involved. In some cases, it’s just getting regulators aligned with what the people want.”
In an era when approximately 40 percent of Americans surveyed cannot withstand a $400 emergency expenditure, according to a May 2016 Federal Reserve report, panelists and attendees alike expressed a deep appreciation for experts coming together to discuss the potential of technology and financing models to disrupt the energy ecosystem for the better, here in Hawaii as well as everywhere, and for everyone.
The final day of VERGE Hawaii concludes Thursday. For more information on the clean energy summit, visit the VERGE Hawaii website.