Potential Speed Bumps For Clean Energy Investment

According to experts, there's a shortage of bankable projects and bankable clean energy industry expertise, especially in less developed corners of the sector such as hydrogen and advanced battery storage.

Institutional investors are still building up their own expertise on more advanced clean energy technologies, including hydrogen, carbon capture utilization and storage, geothermal, biofuels and utility scale electric storage. “But unlike the wind and solar explosion a decade ago, where they could pick solar or wind…, the potential investments are so disparate that I think there's a catch-up factor here where folks really need to get their arms around the technologies," said McKnight, who represents lenders and financial institutions in energy and infrastructure development.

According to Law360, one important shift that's starting to happen is having well-established companies in adjacent industries taking equity stakes in projects or developers, such as oil and gas firms taking stakes in hydrogen, carbon capture or geothermal energy development.

"Having that confidence in who's developing and operating and maintaining the product and the offtaker for a project, providing those stable revenue streams that are so critical for investors," McKnight said. "We need both of those to come together at the same time for this to really take off."

According to experts, while investment in so-called green bonds continues to increase, they remain a tiny slice of the global bond market. Accelerating the use of green bonds to finance clean energy development could get more risk-averse investors off the sidelines.

Green bonds allow more institutional investors like big pension funds and insurers to participate indirectly in a project or series of projects rather than taking a direct equity stake, which might align better with their risk appetites, McKnight added.

"Different investors are going to have different appetites and different approaches, but at a very high level of generalization, the big funds and the big institutional investors aren't going to want to go on a project-by-project basis," McKnight said. "They want a bigger scale and they want their investment to be more de-risked."

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