Financing Energy Innovation: The Need for New Intermediaries in Clean Energy

Stanford Global Projects Center Working Paper Series, Forthcoming

34 Pages Posted: 5 Oct 2018 Last revised: 5 Nov 2019

See all articles by Soh Young In

Soh Young In

Global Projects Center, Stanford University; Precourt Institute for Energy, Stanford University

Ashby H. B. Monk

Stanford University - Global Projects Center

Date Written: November 1, 2019

Abstract

While consistent and long-term sources of investment capital are needed to flourish the clean energy ecosystem, current financial intermediaries have failed to effectively channel sources of funding to entrepreneurs. This study provides a theoretical framework of new roles and functions of intermediation in fostering the transition to a low-carbon economy. We find that investment opportunities (and risks) are not effectively assigned to the appropriate investors due to the fragmented nature of investor networks and the large information asymmetries among different investor categories and companies. Yet, there are no (or very few) investment vehicles today that take these barriers into consideration. Thus, we develop three functions that are critical to effectively intermediate a broad range of investors in clean energy and facilitate an intelligent information flow over the entire clean energy development cycle: (1) an anchor that offers nominal amounts of priming capital that can, in some cases, take a first-loss position; (2) a balanced barbell that enables to raise capital, at-scale, from various funding sources and provides equity and debt capital to companies maturing commercially; and (3) an infomediary that provides reliable and objective information about clean energy companies or projects in a highly transparent and trustworthy manner. In addition, we introduce the new institutions in Silicon Valley as reference points as they are designed to perform functions partially similar to our proposed ones. This paper concludes with a proposal on a new coordinating platform design, a multistrategy vehicle that simultaneously coordinates three core intermediary functions.

Keywords: Clean Energy Investment; Valley of Death; Financial Intermediation; Institutional Investors

JEL Classification: G23, G24, Q42, Q55, Q58

Suggested Citation

In, Soh Young and Monk, Ashby H. B., Financing Energy Innovation: The Need for New Intermediaries in Clean Energy (November 1, 2019). Stanford Global Projects Center Working Paper Series, Forthcoming . Available at SSRN: https://ssrn.com/abstract=3248032 or http://dx.doi.org/10.2139/ssrn.3248032

Soh Young In (Contact Author)

Global Projects Center, Stanford University ( email )

473 Via Ortega, Suite 242
Stanford University
Stanford, CA 94305
United States

HOME PAGE: http://https://gpc.stanford.edu/

Precourt Institute for Energy, Stanford University ( email )

473 Via Ortega, Suite 324
Stanford University
Stanford, CA 94305
United States

HOME PAGE: http://https://energy.stanford.edu/

Ashby H. B. Monk

Stanford University - Global Projects Center ( email )

United States

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