Investors have largely shaken off worries caused by an uncertain political landscape and are accelerating renewable energy funding, but financing headwinds remain, company executives said this week at CERAWeek by S&P Global.
"It took two years for everyone to calm down, and now there is a huge rush of people coming through and getting deals done," said Director of the Loan Programs Office for the U.S. Department of Energy Jigar Shah. ""We probably have $12 or $13 billion worth of SAF and biofuels projects... and we've got similar amounts in green chemicals."
Short-term, high-yield debt was offered to companies wishing to operate in the renewables sector, leaving them with an unclear long-term future. Despite believing in the promise of renewable energy, investors were worried about how the long and short-term risk/reward ratio would pan out.
"It took about 12 years to get the private markets to be fully on board with what we started in 2009, and today you see solar/wind doing over a billion dollars a day globally," Shah said. "And so, you're sitting in a place where you can see what it looks like to succeed."
A globally challenging political and financial landscape continues to make it choppy for investors to navigate. There are worries renewable diesel and sustainable aviation fuel will follow the same path that wind energy did, said Christian Bruch, Siemens Energy AG CEO.
Innovative emerging businesses, like the early days of wind power, were confronted with high-interest rates, which slowed down the industry when it should have been accelerating, he said.
"Financing growth at the moment means building factories," Bruch said. "And that is in an environment where you don't exactly know what will happen in five years with all the geopolitical conflicts and trade regulations. It's not an easy thing, but I think it's manageable."
Large investment firms are becoming more interested in renewable energy, but are not selling their conventional oil and gas assets, said the Carlyle Group's Chairman of Energy Marcel Van Poecke.
"You can't just switch. It's going to take a long time. We invest and not divest because we're not selling the oil and gas businesses. We keep them and decarbonize them, and with that, we can contribute much more.," said Poecke.
"We think, coming from a market background, that sustainable aviation fuels, biofuels, and hydrogen are going to have a massive, massive opportunity here."
The commercial markets are hesitant to fund first-of-its-kind projects. Large energy firms with a lengthy financial history are easier to invest in, even if they are doing renewable energy projects.
This content was created by Oil Price Information Service, which is operated by Dow Jones & Co. OPIS is run independently from Dow Jones Newswires and The Wall Street Journal.
--Reporting by My Nguyen, mynguyen@opisnet.com; Editing by Bayan Raji, braji@opisnet.com
(END) Dow Jones Newswires
03-19-24 1523ET
