Examining Climate Finance

Shepherds_Flat_Wind_Farm_2011Climate finance is the focus of the last chapter in the most recent 1,000 plus page report by the Intergovernmental Panel on Climate Change (IPCC), representing the first time in its 25-year history that the scientific body has looked at the scale of investment and finance that would be needed to transition to a low-carbon economy. An example: As part of a strategic commitment to invest in renewable energy, Google is putting $100 million into financing rooftop solar in the U.S. The company will be able to secure its own reliable energy sources, develop new products and services around energy-use data, earn tax credits and cut carbon pollution.

Peter Meyer is a Zintro expert, and the President of The E.P. Systems Group, Inc., a firm dealing with the intersection of economic development and environmental protection. He currently provides financial management technical assistance to U.S. Department of Energy‘s state and locality grantees under the ARRA. “The price of solar PV is already cost-competitive in much of the U.S. That is true even for small scale homeowner rooftop PV. Commercial scale PV is even less costly, so Google may be saving money on its cots of power from day one with its investment. It consumes so much energy in its operations that it easily can take the place of the ‘power purchasing agreement’ that is the financial linchpin for the firms that use their own capital to install solar and even pay rent for the sites on which they build arrays.

“Google’s move — and those of other heavy energy users — reflects a calculation that involves not merely the current cost of power, but the secular tendency for all fossil fuels to rise in price,” continues Meyer. “Sunlight does not increase in cost every year. Thus, the companies gain not merely what may today be cost-competitive power sources, but a virtually 100% predictable cost of power, and one that will be increasingly cost-effective over time. One interesting question that arises from this sort of move, however, is whether the availability of a lower cost and predictable cost of power has an effect on the willingness to invest in energy efficiency. The downside of Google’s action may thus be that innovative effort and investment in efficiency may be suppressed by the focus on a new power source.”

Zintro expert Lawrence Sullivan advises leading companies in his independent consulting firm, Lawrence D. Sullivan and Company, Inc. He recently led Biomass Business Development at Arborgen, Inc. and is the former Chief Technology Officer for the biodiesel company Kreido Biofuels, Inc. “Change is dynamic and has been since the beginning. We have conclusive evidence of climate change especially related to increases in atmospheric levels of carbon dioxide. The next question is this – is the evidence predictive? Can scientists and policy makers as well as world leaders use the data and make predictions about how to manage changes? Correlation is not always causation as scientist commonly state. In this case the best course is to continue to plan for expected changes by regulation of carbon dioxide emissions by taxation.”

As a sustainability professional with international experience gained in developed, developing and emerging countries, Zintro expert Renilde Becque also has an opinion about the companies who are now investing in renewable energy. “Companies like Google are heavily investing in renewable energy, because it’s of vital self-interest to them to become more independent in terms of their energy (electricity) generation. They also want to protect themselves better against volatility in electricity prices as a result of price spikes in the fossil fuel market with the extraction of fossil reserves becoming increasingly challenging – and in some cases increasingly polluting (tar sands). In addition, they are bringing the cost of renewables down in order to receive parity with grid power.

“By having Google invest in renewables beyond what’s required for their own operations they boost the renewable energy market, therewith driving down the cost per unit of renewable energy generated and hence getting closer to grid parity. When reaching grid parity (from fossil fuel derived energy), the financial argument of ‘renewables are too expensive’ goes out the door, therewith accelerating the transition to a different, more sustainable and lower CO2-e energy mix.”

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