Valley of Death

The timely presentation of Peter Fusaro on Green Energy Financing at our next New York Clean Energy Forum is echoed this week by a Senate Energy and Natural Resources Committee hearing on the Clean Energy Deployment Administration (CEDA). 

With clean energy projects so vital to our economy, environment and security, it is critical that they get over the inherent hurdles of financing.  The Senate Energy Committee is addressing this issue with The Clean Energy Deployment Administration (CEDA) as established under the American Clean Energy Leadership Act which will increase the capital available for clean energy projects thereby helping to mature the underlying technologies and move them to scale. 

CEDA would create a financing entity with the resources, tools, and independence to help American clean energy technologies cross what is affectionately but accurately named the “Valley of Death” that sits between the invention of an energy technology and its full commercial deployment.   Often, with clean energy technology, there is a point at which an energy technology is ready for scale up from a pilot project to a full-scale plant.  But, this critical moment is often when these technologies falter, lose steam and die.  Hence, the “Valley of Death”.

There are typically two elements of clean energy finance:  equity and debt.  Federal tax credits have stimulated equity investments in wind, solar, geothermal; and other clean energy projects.  But, securing a loan for these projects has been more problematic, especially for high risk projects – Bankers will say to prove the feasibility of these projects and then they will consider a loan.  The problem is that commercial scale energy projects often millions or billions of dollars, beyond that of a typical venture capitalist.  In addition, these projects have rates of returns well below what a venture community expects.  The Valley of Death sits precariously between the venture capital and the finance worlds.

As developed in the American Clean Energy Leadership Act, CEDA would administer various types of credit instruments, such as loan guarantees, insurance products and clean energy backed bonds to accelerate private sector investment in the commercial deployment of new energy technologies.  CEDA would be an agency within the Department of Energy (DOE) and be under the direction of an administrator, board of directors and technical advisory council.  It would function in many ways like the Federal Energy Regulatory Commission (FERC).  

CEDA, if passed, could be the important link between energy technology and energy implementation.