Accelerating clean energy finance – bringing public and private together
August 3, 2017
TBB. 2017 takes its cue from the European Commission (EC) in making ‘accelerating clean energy innovation’ its core theme.
It’s a crucial topic – the technological, financial, social and political elements are in place and reacting together to create a clean energy revolution. But not fast enough.
In a three-part blog series, we’ll look at some of the ways to catalyse that reaction, and how TBB can help. This is part one, looking at a smarter approach to public and private finance.
Money, money, money
According to EC estimates, private investment in Energy Union research and innovation priorities totalled €22.9 billion in 2014. That’s a huge amount of money. It’s deviously tricky to nail down a single figure for total public-sector spending on clean energy innovation across the EU, but a cursory glance at the array of the EU’s own funding mechanisms suggests it spends a fair few billion itself, not to mention member states’ individual efforts – just take the recent €4.3 billion pledged by the European Investment Bank for example.
Which is great, but we need more if we’re to accelerate clean energy innovation – especially for those companies in the troublesome space between early-stage start-up and fully commercial business. The best of these companies have huge potential for transforming clean energy in Europe, but are stuck treading water without adequate funding to take the next step.
The EU does a good job of channelling public funding into these businesses but we need to encourage more private capital into the space, too.
The problem is, private investors are understandably hunting for attractive risk-adjusted returns. This could mean accepting a slow and steady return from a low-risk, already commercially successful business. Or it could take the form of high risk, high return – but low capital – speculative backing of early start-ups that might be the ‘next big thing’.
That leaves our pre-commercial but not new-born business stuck in the middle. They still carry the high-risk label of a start-up due to uncertainties around cost, performance and market integration, however they need high levels of investment to take the next step.
The public sector and private sector need to play together
So, what to do? Public finance can step in to de-risk investments, making them palatable to a private sector player where they might not be otherwise. The better approach is use this public funding to allow the entry of private funding at the same time, for example, by posting guarantees – ensuring that investors could expect at least a baseline return, and not lose all their money on an unlucky venture. Or it could simply be taking an equity stake or issuing a loan that makes a company more likely to succeed, for example by enabling a company to build out an asset, such as a manufacturing facility.
The TBB. boost
The EU has an array of funding and financial instruments to cover the whole innovation value chain from lab to deployment of clean energy technologies and there’s plenty more private sector capital eager for clean energy opportunity.
So, what is badly needed is a forum to make these deals happen – to bring together the private and public stakeholders – along with the innovator companies themselves – so that they can discuss and begin to hash out funding structures like this.
That can happen remotely, through applying to this or that scheme, or emailing this or that person. However, it works best when you physically bring those people together and let ideas spark in an environment custom-designed to make that magic happen.
With more than 160 different innovative clean energy business on display and some of the most important industry, public-sector and investor-community stakeholders attending, that’s precisely what we’re building at TBB 2017. With any luck, deals will be struck that genuinely catalyse public-private finance and help accelerate the clean energy revolution.