The Southeast Renewable Energy Summit took place Nov. 16-18 in Charlotte, N.C. The annual conference (which did not meet in 2020) explores clean energy regulatory and policy updates, along with the capital and investment trends that make clean energy deployment possible. Leyline CEO Erik Lensch participated in a panel discussion on clean energy investment with fellow members Ari Citrin, managing director of the Utilities, Power & Renewable Energy Group, Keybanc Capital Markets; William Demas, managing director of Stonepeak Partners; and Federico Toro, head of the U.S. Renewables Business, Repsol.
The panel noted the extremely long interconnection queues for renewable energy projects and the ongoing supply chain constraints that have plagued the industry this year. Despite these two deployment challenges, there is liquidity in capital investment. Erik mentioned that Leyline changed the underwriting process to account for the long lead time project developers need for their equipment and supplies. William noted that clean energy businesses are now being valued on what they will be doing five years in the future and not what is in the pipeline this year or next. This makes capital investment even more challenging than in the past.
There was also a discussion on what makes a particular renewable energy project attractive today. Panelists discussed the abundant land in the Southeast, the ease of working with local communities and policymakers, and the relatively faster permitting process compared with other areas of the country. Erik noted the large energy load coming to states like North Carolina with the arrival of technology giants Apple, Microsoft and their data centers. These technology companies demand renewable energy to power their businesses. Erik also pointed out that he is seeing a greater number of small projects, because the delay in interconnection means that repayment is not assured for up to five years.
Capital requirements are now including environmental social governance (ESG) considerations. While it does not change the internal rate of return, it is a direct response to what customers want today. Erik noted that for the first time, we are seeing real dollars put behind contracts with ESG requirements, while capital providers are more hesitant toward fossil fuel deals.
Ari mentioned that the renewable energy sector may have been "spoiled" by purchase power agreements with long-term contracts, but projects look very different today. While certain clean energy projects look risky, such as the revenue volatility with energy storage, it is a winning strategy over time. And it is with this long-term view, Erik notes, that clean energy investors should approach 2022.