If money makes the world spin round, investment is the new name of the solar game

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The risk averse and understandably conservative world of investment has not always been easy to cajole into injecting cash where it is often most desperately needed. Preconceptions of unchartered technologies, turbulent policies and unattractive finance mechanisms have multiplied into a concerning drain of funds.

Global renewables investment slid 12% last year (according to Bloomberg New Energy Finance). Although in context of a 20% overall market growth, lightning fast declines in PV prices and tumultuous policies in Europe and the US rocking steady handed investors, solar individually saw a pronounced and dramatic decrease in investment last year, from US$142.9 billion to US$114.7 billion

Europe plummeted a spectacular 41% from US$97.8 billion in 2012, to US$57.8 billion in 2013; US investment dwindled 8.4% from US$53 billion, to $48.4 billion; China fell 3.8% from US$63.8 billion in 2012, to US$61.3 billion last year.

Subsequently, attracting investment was the theme echoing across a sea of comfortably seated investors, bankers, business and financial leaders, in the forum of Clean Tech 2014. The annual event, this year titled ‘Meet Asia. Meet renewable energy’s future’, was hosted by asset management form, ThomasLloyd and the Republic of the Philippines in Frankfurt, 24 January.

The event went far beyond polite obligation; a carousel of informed, emotive and passionate speakers cherry picked from influential economists, charismatic politicians and noteworthy academics appeared on a grand stage to convince the gathered audience to invest in renewables in Asia – but more than anything, to take part in investing in the not-too-distant future.

Asia was picked due to its immense economic power, human capital and natural renewables resources, but primarily because Asia is the geographical location of choice for renewables’ investment of the future. The continent is home to the Philippines, catastrophically struck by super-typhoon Haiyan last year, causing 6,000 deaths and damage estimated at US$12.9 billion. According to one speaker, Senator Loren Legarda, this is despite being acclaimed by Geneva as having the best renewable energy laws in the world and being responsible for a measly 0.31% of global greenhouse emissions.

To put that in perspective, the Philippines has a population of 96 million people, the UK has just under two thirds of that with a population of 63 million (according to the World Bank). Despite having almost a population a third smaller than the Philippines, the UK accounts for 2% of global emissions – that’s 6.54 times more harmful green house gas emissions than the Philippines, and the UK has no such internationally noted environmental laws. Senator Legarda was far from jovial her assertion that it is time for developed countries to “put their money where their mouth is” and contribute to investing in solar energy, other renewables, energy efficiency and climate change-exacerbated disaster prevention, on a planet shared with the inhabitants it is responsible for harming.

Justin Yifu Lin, former chief economist and vice president of the World Bank, also highlighted Asia’s preferential placement for renewables investment in his speech. The internationally acclaimed economist took to the podium to champion China’s sprinting economy, stating it has been growing at 9.8% between 1979 and 2012, pessimistically predicting an 8% growth rate for the next 20 years – making China the largest economy in the world by 2030.

Lin is hoping China can pull the rest of Asia into united economic power; however, China is also infamous for its deadly smog. “Pollution and global warming are a real challenge for sustainability,” warned Lin.

Meanwhile, Peter Guthrie, professor of sustainable development at the University of Cambridge, began his speech quoting Thomas Jefferson to convey the sentiment of taking action to invest in sustainable and renewable energy: “No generation should leave debts for future generations.”

Guthrie asked the audience to rethink current models of finance, energy distribution and energy access. The professor challenged the current notion of “constant energy as a human right”.

Guthrie contested the notion of “uninterrupted energy” as detrimental, arguing that “interrupted supply is better than zero”, drawing the dots between the risk of investing in finite fossils fuels which will, regardless of political backing or investment, eventually reach zero. “When resources are scarce we need to revaluate and make sure the [financial] risk is understood,” he said.

The eventual exhaustion of fossil fuels was compared to abundant, albeit currently disruptive, renewable energy. “We have to rethink how energy is distributed and used,” Guthrie said. Limitations to using renewables were a consequence of current outdated models of investment, Guthrie said, pointing out that the lack of essential technology advances was a direct symptom of financial malnourishment. “PV is constantly on the threshold of a breakthrough”, but just requires the investment; with the necessary investment, Guthrie said renewable energy had the potential “not just replace fossil fuels and lower carbon, but improve energy security, allow local generation and empower communities, opening up on and off grid opportunities, mini and smart grids.”

The Cambridge academic also called for a rethinking of the term climate change, saying the phrase should be redefined as “climate instability”; such a change of emphasis would help investors understand the “huge growth potential” and not regard it as a risky venture.

On investment Guthrie said: “Either the private sector needs confidence, security and a clear policy environment, or the government takes the risk.”

The pathways to achieve this realignment of thought and investor confidence were sparked by Filipino senator Egardo Angara who coined the term “economic renaissance”.

The sentiment was reinforced magnanimously by the highlight of the event, the former president of the United States and founder of the Clinton Foundation, Bill Clinton appeared via satellite link from Florida to call for international “cooperation, not conflict”.

Captivating the attention of hundreds of attendees, Clinton addressed humanity’s “final challenge”; with climate change, he said, “we cannot escape each other or the planet on which we all live”.

Clinton pointed to “political and economic inclusion and more understanding” as the way forward for financing renewables on a global scale to provide for an estimated seven billion inhabitants. To a hall filled with economical opportunities, Clinton stated there is “too much inequality between countries, capital and education, this limits the growth potential of the world, we need shared prosperity.”

“We cannot burn up the planet,” he said.

Clinton identified the “biggest challenge” to the renewable energy sector as finance – the “upfront cost” of deploying renewable energy. “The economic case for renewable energy is not made strongly enough,” he said.

Looking to inspire and motivate investors, Clinton highlighted how crucial investors could be: “You could be right in the heart of what could prove to be not just the most important economic movement, but also a profoundly important political, social and public health movement; we should be moving into the most peaceful prosperous and fascinating time in human history.”

Bill Clinton: The former US president led calls for a new form of investment in clean energy.
Cambridge University's Peter Guthrie: Current models of energy finance need to be rethought. Image: ThomasLloyd.
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