Page 64 - North American Clean Energy July/August 2019 Issue

investing in clean energy
Mitigation Best Practices for
Investors and Financial Institutions
Renewable energy policy is vital to the development and deployment of renewable energy. According to the Sierra Club, ninety U.S. cities, ten counties, and two states have already adopted ambitious 100 percent clean energy goals. How are these projects nanced?
by Kimberlee Centera
Bloomberg’s Clean Energy Investment Trends report for
2018 states that more than half of all new investment in clean energy is largely achieved through asset nancing. at means collateralizing investments with hard assets such as property, or soft assets such as cash ow, accounts receivable, or bonding bills. Unlike venture capital funds, which anticipate that some investments will result in tax deductible losses, prudent asset nancing requires a high probability of success.
Risk mitigation is critical when assets are used to nance development, as is often the case with municipal energy projects. Investor con dence is established with the creation of a strategic thinking framework. is includes an in-depth analysis of potential risks, and how they can be managed or alleviated at every stage.
At the outset, a check list of essential considerations includes the following:
1. Developing a strategy, establishing a brand, and leveraging the power of relationships. How will you articulate precisely who you are to the myriad people who shape the outcome of your project, and those it a ects?
2. Ensuring your project is consistent with the most probable future of the industry. Developers need to understand the short- and medium- term trends that a ect their business arena: sunset dates for tax credits, changing RPSs, the growing number of environmentally progressive cities and corporations, cost curves that make power cheaper to generate than to buy, the changing regulations of our power utilities, and, ultimately, the integration of energy storage.
3. Assessing the high-level risk factors associated with the project.
4. High-level transmission analysis including load, transmission capacity, and a solid o -taker.
5. Site feasibility and analysis and high-level permitting review.
6. Title search and review.
7. Site control with executed lease or
option and easements in place.
8. Assembling the project, identifying
various phases of development, and
setting the timetable.
9. Meticulous construction management. 10. Post construction (for a smooth and
transparent transition to operate the
project) includes conditional signo s,
transfer of all documents - including as-built engineering drawings and entire project lifecycle - to the owner/operator. is is referred to as Commercial Operations Date and Compliance (COD).
Due Diligence Best
Practices to Mitigate Risk
Due diligence includes a comprehensive review of legal and nancial considerations. is means discovering any potential risks and evaluating their impact to determine whether the project is a viable investment.
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Technical due diligence identi es total energy yield, social, and environmental implications. Non- nancial goals,
such as goodwill that is gained when demonstrating environmentally responsible corporate citizenship, may also be an important factor.