An Energy System As Revolutionary as the Internet

by Andy Mannle

We have made enormous progress on clean energy in recent years. We currently invest over $260 billion a year in clean energy globally, but much of this has come from government support, which is waning in the wake of global recession, fiscal crises, and economic austerity.

To truly make the transition to a clean economy, we need to do for energy what the internet has done for communication systems.

Our current energy system works like the old broadcast model for television: a top-down, centralized, one-way distribution system with a few channels that were the same for everybody. Moving forward, we need an energy system that is as localized, diverse, and networked as the web; where hundreds of millions of people can produce, store, share, and sell energy the way we currently do with information on the internet.

The transition to a clean economy is currently underway, but to be successful in the race against climate change, we must bring trillions of dollars in additional capital into clean energy investments.

This will require several things. First, we must level the playing field so renewables can compete fairly with fossil fuels. Second, we must create market conditions that attract investment. And third, we must adopt new financing tools and strategies to significantly increase the pool of available investors in renewables.

A Level Playing Field

Governments continue to provide $400 - $600 billion dollars in annual subsidies to profitable fossil fuel companies, while externalizing the true costs of these fuels in terms of social and environmental damage. By shifting subsidies away from fossil fuels, governments can help clean energy compete fairly in the market. The resulting revenues can then be invested in smarter systems for water, transportation, energy and building performance – all of which would produce net savings.

Market Conditions that Attract Investment

The next step is to create a positive investment environment for clean energy. Investors require a secure environment with risk-appropriate returns, and the freedom to buy and sell in that market without unreasonable restrictions. To do this we need to reduce risk, increase access and flexibility, eliminate red tape and permitting hurdles, and standardize procedures so energy-producing assets can more easily be bundled and secured. This allows participation in the market, which increases access to funding for clean energy developers. This in turn drives down capital costs, and makes it easier to lend and borrow money for more projects.

New Investment Tools

Once a solar field or a wind farm is built, it will steadily produce energy revenues for decades, with very little maintenance, low risk and no waste. Investors are hungry for these stable, long-term returns, and that's exactly what clean energy assets produce.

Examples of emerging clean energy finance tools include green and climate bonds; asset-backed securities; and solar real estate investment trusts. Public agencies can also finance renewables the way they finance bridges, schools and other public infrastructure. State and local governments can wean their power grid off fossil fuels, and increase investment in efficiency and renewables for public buildings. Net metering, feed-in tariffs, community solar programs and other "crowd funding" models will also help more people get into the game.

These tools are already working, and as renewables increase their growth trajectory prices will continue to drop. In the United States for example, solar and wind are already vying with natural gas as the three least expensive sources of new power, according to the latest report from GTM Research.

Paradigm Shift

A networked energy system will be much cleaner, more efficient, and more democratic. To get there, we need to increase access – so more people can put their money in tangible energy-producing assets that yield stable returns with positive social and environmental impacts.

This paradigm shift will give millions of people around the globe a real stake and an active role in creating the clean energy future our planet so desperately needs.

Note: A previous version of this article appeared on the Huffington Post.

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