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I recently discussed renewable energy with a New Yorker working in project finance. For keeping-her-job purposes, let's call her Jane Dough. She sheds light on the pessimism of financial institutions that can't seem to stay afloat -- let alone afford idealism. While she envisions energy crises facing this nation's future, she offers two solutions: technological innovation and energy efficiency education.
Michael Kroon: How does the New York finance community see renewable energy?
Jane Dough: I won't speak for the entire city. But I work for one of the premier project finance banks in the world, and our experts tell me all the time that renewable energy will never cover base-load electricity demand in this country.
MK: Why not?
JD: I lay out the details of comparable transactions in the energy space. Coal is overwhelming. Natural gas is overwhelming. Wind is trendy. Solar is extremely difficult to finance. The largest solar power plant in the US is a 75MW facility. The average coal utility is ten and twenty times that.
And the backlog of coal-fired power plants is 20 years long, inhibited only by permitting issues. If those issues are resolved, those plants have long-term Power Purchase Agreements associated with them that will attract quick financing and supply huge volumes of power to this country.
If those permitting issues are not resolved - if our government establishes a cap-and-trade policy on carbon emissions, and these utilities cannot be built, I do not see how their capacity will be replaced with any existing alternatives.
MK: Thankfully, some sort of carbon pricing seems likely. What then?
JD: Renewables will never cover anything but peak capacity unless there is a technological revolution.
MK: We need to drastically ratchet up our renewables research, but barring a technological breakthrough, where do analysts in New York see a carbon-priced energy market heading?
JD: I think there are two theoretical alternatives here: 1.) Power shortages. Or 2.) As the cost of power increases, people will not decrease power usage; but, adjustments will be made to coal plant construction, and existing plants will be retro-fitted.
In terms of 2: existing technology can control sulphur and carbon dioxide in coal plants -- chimney liners, in the most basic of terms. If there were carbon dioxide controls, they might clean the air, but they might also lead to the shutting down of a lot of currently functioning power plants.
MK: So, it's door number 1?
JD: Yes: power shortages. And in my most pessimistic moments, I feel that we might deserve that.
MK: If so, who's to blame?
JD: It is difficult for me, within New York finance, to identify who is the enemy. I am surrounded by successful people whom I respect but whose careers depend on the de-prioritizing of sustainable investments. No one finances renewable energy exclusively because it's clean. Financial sponsors just make good equity investments. I like to argue with them, but as I listen, I realize that they are not the enemy. They are really smart people with experience and responsibilities.
That said, I've watched the same "responsible" professionals lobby for the credit fundamentals of a cigarette company one week and a wind farm project the next. And I realize that public health and renewables are not factors in these discussions beyond their quality as investment considerations or risks.
MK: Is there room for the rest of us to influence your industry?
JD: I'd like to hope so. I had dinner with a friend recently. She went to one of our nation's top colleges. She was known at my high school as a voracious reader and solid individual. She also said the following to me:
"The first month I moved to New York, my electricity bill was $400. No one ever told me I had to turn off my air conditioner".
MK: Can we change such ignorant facets of New York culture? Would a smarter public lead to a smarter market?
JD: Whether this is a function of over-privilege or general ignorance, I cannot say - but come on! It may be that education is the only manageable solution, because we can't beat a market - any market. We have a responsibility to teach those ridiculous teenagers that air conditioning costs money! We should channel this anxiety into a program on personal sustainability and electricity consumption, so that at the very least, a few more little girls and boys in the world know to conserve their AC.
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