I spent 20 years in the old energy world of oil and gas. (I know – mea culpa. On the plus side I so far have 10 years in new energy, so only another 10 years to go before I am in credit…). During the first 20 years of my career, I experienced first-hand the critical role of banks and financial investors to fund projects or invest in infrastructure. It’s hard to think of two worlds – oil and finance – that are more closely intertwined.
However, over the last 10 years, it’s been apparent to me that investor interest in the new energy world is largely absent. Yes, there are clean tech investors, and some of these have even made decent returns, but the sector generally has not prospered. Indeed, for many people, it has a negative reputation.
Finance in new energy has tended to come from the energy or industry companies already active in the sector, rather than external investors. Understandable, given the lack of scale in new energy, the hangover from the financial crash a decade ago and the significant political or regulatory risks associated with many parts of the new energy world.
However, I believe this is now changing.
I see different types of investor – ranging from the speculative venture capital players through to infrastructure funds – now actively exploring for opportunities. I’m being regularly contacted by these types of player in a way I wasn’t last year, and the downloads on Delta-EE’s website by these types of organisation has increased significantly over the last year or so.
Now this might only be because our marketing team is doing a great job (of course), but I believe there’s a lot more to it than that.
Some investors are being “pushed” into exploring the new energy asset classes to invest in because their traditional asset classes are rapidly becoming obsolete (e.g. centralised fossil power generation) or much more competitive with lower returns (e.g. commercial scale wind and solar projects which no longer have the same level of subsidy support, and for which there are many more educated investors in the market looking for the same opportunities).
Other investors are being “pulled” into new energy because they see huge opportunity. Is this the next global scale business? Is the digitalisation of the energy system bringing down the traditionally high barriers of entry? How will a decarbonised energy system work and what assets will be required? I sense many see that we are approaching a tipping point and they want to be ahead of the curve, not playing catch up.
The new energy world is not a transparent commodity or infrastructure business. It’s about services and customers, and for many non-experts appears relatively opaque because a lot of the interesting stuff happens on the customer side of the meter. This is leading to lots of questions as investors get up the learning curve on new energy at the beginning of their hunt to find the scalable assets and business models which decarbonised energy systems need.
So, I have no doubt that over the next 10 years that the investor and new energy worlds will become more closely intertwined. If Delta-EE can make its own small contribution to helping the smart money find the smart plays to accelerate the energy transition, then we will have fulfilled our mission. And I look forward to being in credit as far as my own career is concerned!