Deutsche Bank: What Investors Want is Transparency, Longevity and Certainty-FITs

By Paul Gipe

In a 36-page report issued in October, Deutsche Bank Climate Advisors identified feed-in tariffs as key tool to develop renewable energy on the scale needed.

The Deutsche Bank report, Global Climate Change Policy Tracker: An Investor’s Assessment, joins a series of statements by the world’s leading banks, venture capital firms, and financial analysts during the past few years identifying feed-in tariffs as a proven policy mechanism for delivering renewables in a cost effective and equitable manner.

Below are some excerpts that summarize the reports key findings. From an editorial by the report’s authors.

What investors want is Transparency, Longevity and Certainty – “TLC” – in policy regimes to mobilize capital. As a starting point, we have made what we believe is a unique aggregate risk rating of countries based on key mandates and supporting policy frameworks. While actual capital flows do not follow our rating for every country over the past few years, we believe that investors will become increasingly concerned about regulatory risk and thus countries that deploy a transparent, long-lived, comprehensive and consistent set of policies will attract global capital. We find that the Major Economies Forum on Energy and Climate countries with a lower-risk rating include: Australia, Brazil, China, France, Germany and Japan.

A lower-risk rating relies on a comprehensive and integrated government plan, supported by strong incentives, among them feed-in tariffs. We believe that appropriately-designed and budgeted feed-in tariffs have demonstrated their ability to deliver renewable energy at scale. Many major emitters such as the US do not have enough “TLC” in their policy frameworks.” [Emphasis in the original]

Page 10. “Interventions that reduce risk for clean technology projects, such as feed-in tariffs or loan guarantees, are particularly attractive.”

Page 12. “To address these market failures, public policy interventions that reduce risk must be implemented. Indeed, we believe that Lord Stern’s view that feed-in tariffs “achieve larger deployment at lower costs” has a lot of merit. This is because under RPS regimes with tradable certificates, investors face a variety of risks, including electricity price volatility, renewable energy credit market volatility, and legislative and regulatory risks that raise the cost of capital required to finance renewable energy deployment. This increased cost of capital can make RPS regimes with tradable credits more expensive than feed-in tariff systems.”

New York Times: Worldwide Feed-in Tariffs Best for Investors By John Lorinc

Energy Matters: Renewable Energy Feed In Tariffs Vs. Emissions Trading