U.S. Weighs Legislation to Cut Clean Energy Capital Costs

The U.S. government may propose legislation that would help investors lower the cost of capital for renewable-energy projects, the acting energy secretary said.

“We’ve got to lower the cost of capital for energy investments, particularly for those that don’t have commodity costs,” Daniel Poneman, deputy secretary at the Department of Energy, said today at the Bloomberg New Energy Finance conference in New York today. He took over as head of the department earlier this week when Steven Chu resigned.

Global investment in renewable investment slumped 11 percent to $269 billion last year, the first decline since 2009, according to New Energy Finance. The UN estimates that annual investments of $700 billion to $1.8 trillion in sustainable-energy development are needed to avert environmental catastrophes related to climate change.

“The innovation, the creativity in crafting financial instruments to lower the cost of capital for renewables will be absolutely essential,” said Poneman, the deputy U.S. energy secretary who’s overseeing the agency until a successor is confirmed. “Some will require legislation.”

Power plants that turn wind and sunlight into electricity require significant upfront funding, and the technologies’ lack of established history and other perceived risks may deter some investors, he said. Legislation may provide incentives that make renewables more attractive to investors.

Alaska Senator Lisa Murkowski, the top Republican on the energy committee, and Senator Chris Coons, a Delaware Democrat, were among four lawmakers who introduced legislation today that would let renewable projects take advantage of a tax-advantaged corporate structure known as master-limited partnerships.

Natural Gas

As renewable energy becomes more widely used, arranging financing will get easier, Poneman said.

“As people become familiar with it, a larger pool of capital itself will help lower the cost of capital,” Poneman said in an interview today. And until then, booming supplies of natural gas will help reduce carbon emissions.

“For the next extended period we are going to be benefiting from large supplies of gas that will help reduce the cost of energy and, at least compared to other forms of fossil, cut greenhouse-gas emissions in half.”

Gas is “a long-term bridge to an even lower carbon future.”

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