Why Renewable Energy is an attractive investment

epgThe European Generation Strategy Summit & Power Project Financing and New Technologies Forum took place in Vienna on 27-29 November 2013, attracting high-end players from the European energy market and politics. The European Sting, a keen follower of Energy Affairs at the Old Continent, was there to contribute to the dialogue and report on the event. The participants discussed the evolution of the EU energy strategy and possible future challenges before it, raising issues of reshaping the traditional energy industries with smart integration of renewable energy sources (RES) into the energy system.

Market Directions

Over the last two decades the structure of the European energy market has dramatically changed, as principles of sustainability, economic efficiency and energy security became widely embraced by society. Today all European states demonstrate a willingness to adhere to these principles and most of them show a readiness to promote sustainable development through the use of alternative energy sources. For instance, in Norway almost all electricity is generated by water sources. And Latvia, hugely dependent on Russian oil and gas in the past, is now meeting national demands for electricity by using hydro energy (54% of overall electricity supply) and biomass (3% of overall electricity supply). Other countries are actively developing solar and wind farms, with Spain being the absolute leader in this segment of the RES market.

However, not all participants were optimistic about the RES revolution in the European energy sector. Opponents pointed out that renewables disturb the balance of the energy system, are costly to produce and too expensive to consume and are not worth to be supported and developed in the future.

On the other hand the impact of the global environmental crisis has become impossible to ignore, calling the international community to find solutions fast. Andre Jurres, CEO, NPG Energy, in his “Future of Energy” speech emphasized that with a constantly growing population, energy consumption will only continue to rise, making international environmental goals a mere ambition, impossible to achieve.

NPG Energy sees the use of alternative energy resources as a path to sustainability and the only way into the future. However, at the moment progress along this path is rather slow and requires large financial contributions and constant investment.

In view of the importance of finance for anything to move forward a special day was dedicated to Energy Project Finance during the conference. This article analyzes the outcomes of the special financing day, discussing the key trends, structures and methods for finding investments to implement alternative energy projects.

Financing Baseload and Renewable Energy Projects

The financial panel of the Forum included UniCredit Bank, EnerCap Capital Partner, European Investment and Partners, Deutsche Asset & Wealth Management International GmbH. The key players on the financial market showed interest in the development of renewable energy projects. Energy sector experts discussed deals that equity investors are seeking and the terms they are ready to offer.

Daniel Kockisch, UniCredit Bank Austria Project and Commodity Finance Director, spoke about financial structures and the requirements of financial institutions for energy projects. Marta Navarrete, Former EU Commission Program Manager explained how to deal with the financial needs for infrastructure development and transitions. Jim Campion, EnerCap Capital Partner, addressed the audience on how to engage institutional investors for financing renewable energy projects. The panel was followed by numerous questions and a fruitful discussion.

Potential Investment for Renewable Energy Projects

Renewable energy projects are recognized as socially beneficial are often stimulated and supported by government through energy market instruments such as feed-in tariffs, premium, renewable obligations, tenders, fiscal incentives. This support makes renewables an attractive product for private equity funds, equity, capital/project grants.

Apart from venture capital, traditional banks also have an interest, introducing special programs to offer debt finance mechanisms, mezzanine debt, senior debt, and guarantees.

Similarly, international financial institutions, such as EBRD, IFC, European Investment Bank (EIB) are participants of the energy market. For instance the EBRD has introduced alternative energy programmes in Armenia, Georgia, Russia, Ukraine, Bulgaria and Estonia.

Governmental grants and export agency guarantees are another way for securing finance in this sphere.

Barriers to finance RES

With all that said, it is necessary to admit that RES projects are controversial. First of all they are risky, i.e. investors have a wide range of risks to consider, starting with country risks, such as change of government policy to technological, administrative procedures. Second, the subsidies granted to alternative energy projects are under a great deal of political influence and, thus, depend on how long the government can afford to subsidize and invest in innovations.

Stabilizing Policies, Rules and Regulations

These risks may be overcome by providing a stable legal system and guarantees to investors that conditions would not change in future. According to Dr Bjorn Peters, representative of Deutsche Asset & Wealth Management International GmbH, investors seek stability through understanding of the future. Even ‘what if’ scenarios and trends are taken into account by investors when considering a deal.  RES regulation should be predictable and based on a concrete set of rules that is not likely to change or be politically affected.

Conclusions

According to the World Economic Forum, energy production remains the main contributor to global warming. Therefore sustainability is critical to the overall energy architecture. In this path local government plays a key role in this process as it can mitigate risks and provide guarantees for investors. Moreover, energy sector to develop need more scientific innovation to make RES more market efficient.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

On Youth Participation: Are we active citizens?

Corporate tax remains a key revenue source, despite falling rates worldwide

JADE President opens JADE Spring Meeting 2014

Venezuela: ‘A worrying destabilizing factor in the region’, Bachelet tells Human Rights Council

Mental health and suicide prevention: why focus on primary care

Restoring government control across Central African Republic is ‘key’ to lasting peace, stability – UN envoy

Don’t take African generosity towards refugees for granted, says UN refugee chief

UN agencies call for more resettlement and end to detention of asylum seekers in Libya

EU-Russia summit in the shadows of Kiev’s fumes

Make no mistake: the purpose of business is to serve society

Brexiteer May gets lip-service from Trump and Turkish promises from Erdogan

A digital tax sounds like a great idea. Here’s why it might not be universally popular

UN report on Syria conflict highlights inhumane detention of women and children

Ukraine: The West and Russia negotiate shares of influence

EU Parliament: It takes real banks to fight unemployment and recession

Service and Sacrifice: Guinean peacekeepers make their mark in Mali

China and China-EU Relations in the New Era

ITU Telecom World 2018 takes place in Durban, South Africa

The US-Mexico trade deal a threat for others, Trump to single out China, Europe

Greferendum: the biggest political gaffe in western modern history to tear Europe apart? #Grexit #Graccident

UN Security Council offers Yemen Special Envoy ‘their full support’

MWC 2016 LIVE: EC adds Brazil to partner tally

Road safety: Data show improvements in 2018 but further concrete and swift actions are needed

The Sting’s Values

China in my eyes

Service and Sacrifice: Ugandan ‘Blue Helmets’ support UN efforts to bring peace to Somalia

Bundesbank’s President Weidmann criticises France and the EU. Credibility at risk?

Why women aren’t allowed to work

The 100-year climate catastrophe of Mont Blanc

Economic sentiment and business climate stagnate in miserable euro area

‘Stand united against anti-Muslim hatred’ urges Guterres, after mosque shootings in New Zealand leave 49 dead

Prisons are failing. It’s time to find an alternative

Still recovering from devastating cyclones, Mozambique, in UN address, warns of global warming’s ‘nefarious consequences’

5 things to know about the Western Balkans

Commission presents EU-Vietnam trade and investment agreements for signature and conclusion

What keeps me up at night? Two strategists reply

Collaboration and connectivity at ITU Telecom World 2019

Hungary: people born in the 2020s won’t have legal rights any more to buy tobacco

UN highlights profound implication of population trends on sustainable development

The mental health of health professionals: is it worth it?

The world just took a step closer to eradicating polio

Global Citizen – Volunteer Internships

A few, or rather two, trade and economic alliances may rule our brave new world

Upgraded EU visa information database to increase security at external borders

MEPs want to ensure sufficient funding for Connecting Europe’s future

Privatisation and public health: a question of Human Rights

Why a healthy planet and a healthy economy go hand-in-hand

“If the job market doesn’t exist, then even the most brilliant Youth Guarantee cannot ensure a job to these young people”, European Youth Forum Secretary General Giuseppe Porcaro on another Sting Exclusive

The future of suicide and depression prevention

These countries have some of the highest voter turnout in the world

On World Day to Combat Desertification, UN shines spotlight on ‘true value’ of land

To beat hunger and combat climate change, world must ‘scale-up’ soil health – UN

UN chief laments ending of Cold War-era disarmament treaty

10 reasons why today’s cyber leaders are tomorrow’s world leaders

The world to teach Germans to…un-German

Europe’s richest regions actively seek investment from China’s biggest banks

How distorted is the EU labour market by this crisis?

Boris to end up in jail if he loses the next elections?

‘€1 million’ fines for rescue boats prompts UN concern for future sea operations

Why artificial intelligence is learning emotional intelligence

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s