One hundred years of deals have made borrowing costs "much, much lower" and amount of money "still much much higher" for fossil fuel projects than those for renewable power plants but other "forcing functions" will shape a new financing playbook for lucrative clean energy transactions, according to climate tech venture capitalist Tom Steyer.
Renewable electricity accounted for 86 percent of new generation capacity added globally in 2023 but fossil fuel plants are still winning investors comfortable with the reliable returns they have come to expect from thousands of "plug and play" comparison transactions.
"Let me say that I think that is insane because looking back over the last 100 years of energy and projecting that for the next 100 years ... the implication is that the forcing function is economic," said Steyer, co-executive chair of Galvanize Climate Solutions, during mainstage remarks at the GreenFin 24 conference in New York. GreenFin is produced by the same company that publishes this website.
"I would argue, ‘No, that’s not true,’ because the forcing function is going to be what happens to the rest of the world. The forcing function is human life, human health and also, if I may say so, the dramatic hit to human economic welfare that we’re going to see from destroying the natural world."
The long-term consequences are financial, too
Steyer referred to how consumers battered by floods, sweltering heat and wildfires, or unable to get a home mortgage because of climate risk will view the continued support of coal or natural gas plants. That could shorten the life of these assets, and investors focused just on economics could find themselves accountable more quickly than they realize, Steyer said, drawing parallels to the subprime mortgage crisis of 2007 to 2010.
On the flip side, renewable energy offers opportunity for growth in a world where energy demand continues to grow exponentially, Steyer argues in his new book, "Cheaper, Faster, Better: How We’ll Win the Climate War."
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