Here are 5 “I’s” to be thankful for in our global pivot towards sustainability. Let’s keep in mind the goals here; that is, the efficient and restorative use of resources for a healthy, prosperous and profitable future. When we invest in sustainability today, we improve our communities and our environment so that future generations can live together and enjoy the planet as we have. If we invest locally, in food and energy independence, we improve our own security and that of our families.
There’s been tremendous momentum for the clean energy revolution in 2015. The clean food movement is gathering steam and knowledge of the economic benefits of localization are growing. Here’s 5 “I’s” we can be thankful for:
Innovation: Even with research budgets flagging in many areas of the world, the private and public sector continue to innovate with new technology to solve the resource problem. As global recognition grows that the resource problem is one of math and not ideology, we can hope that momentum should increase. Here are a few notable 2015 innovation trends you can discuss around your community:
- Microturbines: In February 2015, two private companies LucidPipe, the manufacturer, and Harbourton Alternative, the investor, teamed up with the City of Portland, OR to install a 200kw microturbine system in the city’s water pipes.While not disrupting the functioning of the pipes, the microturbines use the energy of the flow to create electricity. For the gearheads: the 200kw system expects to generate 1,100 MWh’s of electricity per year, enough for 150 homes, which implies a ~63% capacity factor for the technology (equivalent to some natural gas plants). The $2M in energy sales over the 20 year PPA life implies a kWh price of around $0.10. Microturbines and other technologies that capture wasted energy are going to be big business. Here’s another such innovation just waiting to be unlocked.
- HumanPower: Here’s your future business. With proven technology, you retrofit the flywheel in rowing machines, treadmills and elliptical bikes to capture the wasted energy created when someone works out. The energy charges a battery, which the gym uses in conjunction with a smart meter when electricity rates are high. Bring in a specialty finance company, also you, to finance the savings and share your portion with investors. On to your global roll out but you won’t be the only one promoting financial and technological innovation to save resources – the big fish are getting involved too…
- Bill Gates is expected to announce a multi-billion dollar clean technology innovation fund at the start of this year’s climate summit (COP21) in Paris. Announced in the NYT this week, the fund will fuel needed innovation in new clean technologies that streamline and improve efficiency in energy systems. Kudos to Bill and other well resourced folks for doing what needs doing and while innovation is necessary, what we need more than ever is the all-in implementation of proven technology…
Implementation: There’s a whole slew of investor ready technologies just waiting for implementation in our energy systems. Three in particular, whose prices have fallen between 60-90% in a few short years are Solar PV, Wind and LED lighting. These technologies enable clean power generation and the implementation of energy efficiency retrofits at a profit for investors.
While investment growth has been brisk, with over a trillion dollars financing clean energy projects in the last few years globally, we’re still missing the mark for wide scale adoption for a few main reasons.
First, politicians have yet to get on board, come to consensus and steer the ship towards a clean energy solutions. The evidence they need, jobs, a reduction in pollution and a boost to the domestic economy is readily apparent and documented. Hopefully, COP21, continued activism from voters and transparency on funding sources can help us re-establish the right course and construct of our political systems. We need guidance at the local level, in zoning laws, at the national level, in right sizing a 5-to-1 subsidy advantage in favor of incumbent industries, and at the global level in the form of cooperation.
Second, Financial institutions are dragging their feet. While there have been a number of newsworthy commitments by banks to invest in clean energy and many of them have funded portfolios of projects, we’ve yet to see the wide scale pivot to build pathways to dedicated investment. 401K and other employ plans should all have a placeholder to participate in investments in clean energy across the capital stack that rival credit alternatives. Progress is being made at the corporate level but product groups are moving more slowly. You’re hear a lot of talk about investment opportunities in emerging markets, clean energy and water conservation but finding places to put your money is another story all together.
Part of the problem is the financial regulations prohibiting banks from investing balance sheet capital. While prudent in many cases, I view this as a large impediment to galvanizing investment into sustainable infrastructure. The net effect is that product innovation is low and lead times are exorbitantly long. It’s much easier for the banks to process innovate and ignore content all together.
An associated problem is the challenge of capital formation. Beyond the retail, private wealth and institutional landscape, the bulk of capital is tied up in the opaque world of private equity and venture capital. While there are offerings for clean energy and other sustainable investments they are difficult to track much less access for everyday investors and savers.
While the Impact investment arena is growing at a healthy clip, still more investment and financial innovation is needed to unlock a smooth pathway for capital formation and make these efforts more than just symbolic.
Recent regulatory changes on crowd equity funding and notable investment efforts from the likes of Howard Buffett’s i(x) are bright spots from opposing poles. While crowd equity funding is sure to evolve, the $1M annual limit is likely to limit any truly transformational results from this avenue alone.
Against a backdrop of structural headwinds but with economic tailwinds, the clean energy transformation has performed admirably. In the US, clean power made up 60% of new generation in 2015 and many areas of the globe are crafting plans or have significant investment already underway.
Incubation: Young minds are reading. Today’s generation is coming up well-versed on high waste streams, climate risk and scarcity. Thanks to the internet and some progressive journalism from the majors (9 people own 1600 major news outlets) young people cannot only learn but use there voices to ask their teachers, parents and friends why we aren’t acting more decisively. Circumventional finance platforms like Mosaic, AgFunder and others are a direct result of these shifting winds but there net effect is still small next to the juggernauts of capital controls. Will the old guard shift beyond symbolism and listen to the voice of the new generation? Will politics recognize the majority call to action? One thing remains sure – the good ideas are incubation in the minds of the young and evidenced across the entrepreneurial landscape of the internet economy.
While the young give us hope; old ideas are rooted in the pivot to clean energy and sustainability as well. The insulation comes in the form of savings and security…
Insulation: Energy Efficiency is a creeping up as possibly the best risk-adjusted return option available today. When we lower operating costs, we insulate our business or our family from shocks to the economic system, like lost jobs or customers and general financial cycles. That’s exactly what early investors in energy efficiency are realizing, stability of returns reaching into the double digits for all stakeholders in many cases.
Doubly, both Efficiency and Renewable Energy offer security benefits at the national, state and local level. A distributed renewable grid system is a more difficult target for a terrorist attack, responds better in an environmental disaster and has none of the associated costs of fuel volatility of non-renewables. Energy Independence and thus security through renewables and efficiency should be hailed as the most American thing we can do. The companies that made fortunes on the last regime and fossil fuels should help us pivot (they have the capital), retrain their workers (it’s the right thing to do, again American) and continue to make fortunes. I can live with that and I’m pretty sure our children can but the move must be more than symbolic. It must be unconditional and tectonic not incremental, just like the banks. Then we can thank them for it instead of scratching our heads and wondering why we are liquidating the planet for a few more good decades. This brings us to inspiration – for our problems are many and without hope – it’s hard to be thankful for anything.
Inspiration: We can draw our inspiration from many places. Together, we’ve accomplished many great things and it hasn’t been easy. To all people fighting for a future that is profitable today and prosperous tomorrow, together we gather strength from each success. From the young around us, still rightfully enchanted by our beautiful world, to the artists, poets, journalists, pioneers, politicians, investors and ordinary citizens using their voices and positions to promote sustainability, our ability to sustain ourselves, we can say thanks.
I say thank you.
More people join everyday and slowly the impediments recede, the logic of pushing against becomes harder to defend. Mostly, we might draw our inspiration a beautiful day or a rising sun, which powers all life and can deliver 20,000 times the electricity we are using today.
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