The briefing memo discusses barriers to scaling up clean energy technology use due to high capital costs. While research and development is funded by governments, private sector financing for commercialization is much more expensive than other sectors, with an average loan rate of 12%. Currently only 20 companies invest through the tax equity mechanism, keeping costs high. Global clean energy investments are rising but dropped 11% in 2012 as subsidies declined and costs reduced. The memo recommends lowering the cost of capital to reduce technology costs and sustain clean energy growth without subsidies.

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BRIEFING MEMO
To: Joel Smoot and Colleene Thomas
From: Kyle Whelton, Intern
Date: 7/19/13
Re: Clean Energy Funding Briefing, Energy and Natural Resources Committee
Ten years ago, the greatest challenge facing the clean energy industry was a technology gap. We
have closed that gap substantially, but face barriers to scaling up the use of technology due to the
cost of capital. While the federal government funds research and development costs, the private
sector financing that brings these technologies to market remains much more expensive than in
other sectors.
Technology Evolution
Like many new innovations, clean energy technologies go through five stages of before reaching
market maturity. These stages are:
1. Research and Development
2. Demonstration/Testing
Funding for phases 1 and 2 mostly comes from venture capitalists and government grants
3. Deployment/Piloting
4. Diffusion/Commercialization
Phases 4 and 5 are the make-or-break period for new companies and require large
amounts of capital from loans, bonds, or private investors
5. Commercial Maturity
Tax Equity
Smaller clean energy companies generate tax credits, which they may transfer to a larger investor
as a form of repayment, known as tax equity.
 Currently, there are only 20 companies and banks that are investing through tax equity,
which holds the cost of capitol much higher than it would if there were hundreds of
companies competing for the credits.
 The average loan rate in the clean energy market is around 12%, which is markedly
higher than other sectors.
 Tax equity is not the most efficient way to spend government dollars. Direct spending
such as grants would cut out the cost of the capital. However, tax mechanisms have
historically been more politically palatable.
 In the first six months of 2013, markets have supported $6 billion in tax equity
transactions
Clean Energy Investment Trends
 Global investments in clean energy are on the rise and almost matched the investment in
fossil fuel in both 2011 and 2012
 Investments dropped 11% in 2012 because government subsidies have declined and the
cost to build these projects has also declined

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 The main goal for clean energy right now is to reduce technology costs without
subsidies; however, this will be tough to do without first lowering the cost of capital
Wisconsin Specific Points
Wisconsin is home to a growing set of clean energy component manufacturers, suppliers, and
developers. As the cost of clean energy technology has come down, we’ve seen substantial
growth in this sector. Wisconsin industries have a significant interest in financing tools,
including sustaining the Production Tax Credit.