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Emerging Trends in Clean Energy Investment

By James Kueser, CFO
September 21, 2023

This article is the first installment in a series from EGXFuels’ Chief Financial Officer, James Kueser. This series will cover rising trends in green energy investment, project financing, and other topics related to funding and financing in the clean energy sector.

Shifting Landscape

In no recent period on record has there been such an urgency placed on climate change, including a comprehensive global transition towards a decarbonized economy. In the pursuit of a sustainable prospect for current and future generations, the global energy landscape is in the midst of a transformative shift that includes the ongoing and persistent attrition of fossil fuel-fired generation in favor of climate-friendly renewable resources. As a result, over the coming decades, unprecedented levels of capital investment are anticipated to be allocated to satisfying the forecasted global appetite for Clean Energy solutions while necessitating alternative capital sourcing mechanisms and new funding paths necessary to support this transformation.

Investment Renaissance

Until the onset of the Energy Transition and the corresponding attention being paid to carbon neutrality, renewable resources have rarely held priority funding appeal within the investment community. However, as a result of widespread government policies and incentives to spur investment into the development and construction of sustainable generation resources (most notably in the case of solar/battery and wind resources), such resources have secured renewed investment interest from broad groups of investment capital. While solar/battery stations have emerged over the last decade as frontrunners in current investment and total capacity additions, the once-overlooked technology that is now gaining significant interest and traction within the investment communities is geothermal energy (especially with respect to advanced geothermal technologies).

Private Investment

Another notable trend in renewable energy funding has been the surge in private investment. Traditionally, investment in renewable resources has been the bastion of federal authorities, regional government jurisdictions as well as local municipalities.  However, over the last two decades (and especially in the advent of government policy tax/investment incentives), private investment capital is now recognizing the financial viability and long-term prospects of these sustainable energy projects.

The key private investment classifications that are now investing in sustainable energy include the following:

  • Private Equity & Venture Capital
  • High Net Worth & Family Office Capital
  • Institutional Capital (including insurance funds, pensions, endowments)
  • Corporate & Strategics

The shift toward private investment has injected substantial capital into this sector that was previously not present in the marketplace, funding everything from sprawling utility-scale solar farms to niche applications including commercial flywheels and modular fission reactors.

Startups and Technology

Innovation in the renewable energy sector has also given rise to a host of startups armed with groundbreaking technologies and the ability to disrupt the energy landscape. Strategics and Venture Capital firms are allocating investment funds towards R&D as well as growth/expansion endeavors, hoping to support breakthrough technologies that can accelerate the transition to a decarbonized economy.  From cutting-edge energy storage and grid optimization installations to advanced solar panel designs and Enhanced Geothermal Systems (EGS), investment capital providers now recognize that these startups play a crucial role in diversifying the sector’s funding ecosystem. Correspondingly, these capital sources are also implementing diversified funding and financing structures that are tailored to each technology’s unique characteristics.

Impact Investing

Climate-oriented investors are emphasizing the need to include “impact” as part of their return on pledged capital.  Such impact is being measured with societal and environmental metrics balanced against requisite capital investment as well as operational timeline considerations. Representative groupings of Clean Energy investors are now seeking investments with the capability of achieving global-scale operations and corresponding climate-mitigation impacts within an accelerated implementation horizon.

ESG + Balance of Equity Criteria

The imperative of including Environmental, Social, and Governance (ESG) and Balance of Equity (BOE) criteria into investment decision-making has prompted a further shift in the way investment funds are allocated. Investors are now seeking to align their portfolios with sustainable and ethical societal values, especially those that prioritize stewardship in the preservation of indigenous resources as well as the protection of the native environment. This trend has led to a rise in funding for renewable energy projects that not only trumpet robust financial returns, but that also prioritize the uplift and betterment of host nations as well as the livelihood of local communities.

The Road Ahead

While many of these listed trends maintain considerable promise for progress in Clean Energy investment, this sector still faces select challenges on the path to sustained investment growth:

Grid Interconnection/Stability

For resources tied to electricity production, grid interconnection and integration remain a challenge. Renewable resources located away from population densities continue to struggle with interconnection. Moreover, as renewable energy penetration increases, grid stability becomes a greater challenge due to resource intermittency (necessitating smart grid technologies and energy storage solutions to manage this integration).

Infrastructure Development

Infrastructure facilities (including transmission and storage) are essential for the implementation of most Clean Energy projects. The need for investment in infrastructure upgrades is evident in most countries and regions.

Policy Consistency

Inconsistency and variability in government policies/regulations creates uncertainty for investors (hindering investment decision-making). A clear and consistent policy framework is critical to maintain investor confidence.

Technology Development

Sustainable energy projects with new or novel technologies may carry inherent risks that investors find difficult to evaluate. Sponsors must advance new technologies to mitigate risk and strengthen the investment profile.

Learn more about EGXFuels

Recent trends in Clean Energy investment underscore the urgency to transition towards greener and sustainable energy sources. Private Investment, Impact Investing, Technology Advances and ESG/BOE criteria (in conjunction with supportive government policies) are critical components reshaping the Clean Energy investment landscape.

EGXFuels has introduced a revolutionary geothermal energy technology that produces green renewable fuels, has the ability to achieve global-scale climate-mitigation impacts and is currently being demonstrated/proven in the field.  The EGXFuels zero-carbon platform is not dependent upon grid integration upgrades or associated infrastructure development, and embraces the principles underlying the referenced ESG/BOE criteria.