YieldCos Poised to Raise $1 Trillion in Clean Energy Investment
A relatively new financing mechanism for renewable energy is poised to raise more than US$1 trillion in investment, making capital more affordable for clean energy development, Deutsche Bank predicts in a report released last week.
YieldCos are modelled on master limited partnerships (MLPs), a financing tool that has raised more than US$700 billion for oil and gas projects. But in the near future, “we expect YieldCos to not only increase the availability of capital, but also provide significantly lower cost of capital to the renewables sector,” Deutsche Bank reports. “Just like the MLPs acted as a key growth enabler of the oil and gas sector in the U.S., we expect YieldCos to be a significant growth enabler of the renewables sector. “
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YieldCos offer high rates of return for investments in large solar and wind farms, but currently account for less than 1% of renewable energy financing, RenewEconomy reports. Their rapid growth “will further reduce the cost of finance for renewable energy projects, and highlight the massive shift in global investment trends, from the floundering fossil fuel industry to the clean energy sector.”
MLPs achieved compound annual growth rates of 27% over 24 years, Parkinson writes. “Deutsche says the opportunities in renewable energy YieldCos will be even greater because ‘the YieldCo phenomenon is global, growth rates are likely to be much faster than MLPs, and the size of the market is likely to be much larger than the oil and gas sector.’” (h/t to CleanTechnica for pointing us to this story)