Urgent Need for Clean Tech Project Finance – FT

August 22, 2009

by David L. Levy

The urgency of Daniel Goldman’s proposal to create a The Clean Energy Accelerator Corp. (see previous post) is reinforced by an article in the Financial Times today,  Cash Crunch Could Stain Clean Technology. Richard Waters writes that:

The lack of capital, however, is preventing many companies in the alternative energy world from reaching the scale at which they claim they can start to drive down unit costs of production to a level that could eventually make them competitive with traditional sources of energy.

Even companies that have been able to find a market – often due to government subsidies or other mandates that guarantee them a market, in spite of a lack of direct cost competitiveness – are struggling because of the lack of capital.

Though venture capital investments in clean tech have been picking up recently, “traditional project finance markets are still largely closed, and the public equity markets….remain closed to companies that have yet to prove long-term viability.”

Government fiscal stimulus funds have significant sums for environmental goals, but the problem is that current government funding mechanisms are inadequate, temporary, and somewhat arbitrary. The investments required for a transition to a low-carbon economy amount to several hundred billion dollars a year over a more than a decade – far beyond the timescale and scope of current government projects. The proposed energy legislation in the US envisages a revolving clean energy loan fund of just $30 million, and that is being fought bitterly.

The FT article points to one company left on the sidelines:

Quallion, a private maker of cells for advanced batteries, was one of those passed over this month as the US government announced plans for $2.4bn in support for battery makers – one of the first signs that green stimulus money is finally starting to flow.

Quallion had sought $220m to build a factory for truck and car batteries, but must now contend instead with better-financed rivals that have been given a leg-up by the taxpayer.

“When someone comes along and slaps down $300m for a new factory for my competitor, that changes the dynamics of the market,” says Paul Beach, Quallion’s general counsel and head of business development.

The structure of the proposed The Clean Energy Accelerator Corp. would help leverage private capital to generate a larger investment pool and ensure its independence from political pressures, allowing it to focus on more commercial and scientific project criteria.

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