Financing Approaches for Funding Renewable Energy Initiatives

Writing in Business Officer, Michael Philips and Lee White show us how it is still possible, even in the face of the financial crisis, to fund alternative energy projects. Their subheads are: Clean Renewable Energy Bonds, Governmental Purpose and Private Activity Bonds, Endowment Fund Loans, Private-Sector Tax Incentives, Performance Contracts, Renewable Energy Hedge Agreements, Power Prepayments, and Financing Energy Security.

Across the United States, an increasing number of higher education institutions are pursuing large-scale renewable energy projects, in some cases as part of their commitment to achieving carbon neutrality under the American College & University Presidents Climate Commitment (www.presidentsclimatecommitment.org). While many projects benefit from some grant or gift funding, very few are funded exclusively this way.

So, where does the rest of the capital come from? What financing structures are available to institutions that want to install solar, wind, geothermal, or biomass systems that can generate a sizeable share of their campus energy needs? And, how can costs be lowered by structuring deals with private investors? What follows is an overview of some of the more common and emerging financing sources and structures for campus renewable energy projects.