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Inaugural Clean Tech Forum Looks At Financing Renewable Energy  

Despite forecasts by the U.S. Department of Energy, a dramatic increase in the use of fossil fuels in the next 50 years is not desirable, both for environmental and economic reasons, said Travis Bradford, adjunct professor of management and founder of the Prometheus Institute for Sustainable Development.

“As new renewable energy technologies and smart entrepreneurs figure out ways to do things faster, better, and cheaper, I just don’t see us building predominantly coal-fired power plants in 2025 or 2030,” Bradford said during the keynote address of the inaugural Chicago Booth Clean Tech Forum, presented by the student-led Energy Group and the Polsky Center for Entrepreneurship, at Harper Center on November 5.  The half-day event gave students insights into new alternative energy technologies and included presentations by clean tech entrepreneurs who presented at the Midwest Alternative Energy Venture Forum the following day. 

The United States alone is awash in so many renewable resources that redirecting them for industrial use would not even deplete .1 percent of them, Bradford said. “Scientists, engineers, and capital markets are going to harness those resources. Capital markets are going to do that because they think this is a way to make money.”

The United States has a strong history of powerful energy research and development, he said. In the 1970s, the country spent twice as much on energy research and development as it does today. Bradford said both energy prices and federal spending on research and development dropped significantly in the early 1980s.

When faced with the problem of rising energy costs in the late 1990s and early 2000s, the private sector stepped in and responsibility for financing research and development. “Since 2004, it has grown wildly,” Bradford said. Annual growth of 50 to 70 percent has been spread across all types of capital.

In 2007, $150 billion was invested in early stage equity, late stage equity, and asset finance. “It’s not the research and development that is so exciting right now,” Bradford said. “It’s that there are technologies that can be economically deployed at the end of that financing curve.”

Venture capitalists are putting about $13 billion a year into renewable energy, Bradford said. About 60-70 firms have expressed interested in dedicating new capital or a portion of their capital to the industry. “There are tens of billions of dollars of unallocated capital raised specifically to invest in this sector for which investors are having a lot of trouble finding attractive people to work with,” Bradford said.

Much innovation remains badly needed in the financing process, he said. “People are not yet optimally pricing renewable energy projects, because they have not yet satisfied themselves of the risk characteristics. That’s just a matter of time, should the technologies continue to perform the way they’re expected to. Therefore, the cost of capital will continue to come down over time.”

Bradford gave students the tools to understand that renewable energy is not just a market force of the future, said second-year student Sara Hochman, co-chair of the Energy Group. “People are investing in it today, but in order to make it successful and commercial many changes in our infrastructure will have to occur,” Hochman said.

Phil Rockrohr