ENERGY FINANCE


ENERGY AS COLLATERAL


Renewable energy investments are very attractive to the financial industry: they are the only investments where a) both the facilities and the output can be used as collateral, collaterals can be traded for values above 100% of the investments, the operation is very simple (and can be covered by insurance), the operation needs no fuel, so has no cost price wild card and by this all the operators (debtors) are almost of virtual importance and the operation. From a financiers perspective there are not better investments models than fuel-less energy facilities. Certainly if the the other finance tools are implement also. But the output (energy) as collateral is the first and huge tool. Giving any fuel-less energy investment not the coverage of near-dead COD insurancers, but the coverage of real general market demand for its output. A collateral that performs also in economic decline (or even collapse) as the fuel-driven energy plants than have a huge downside (as they must buy fuel for every second/minute/day/week of operation). Coal fired plants (now the cheapest in operation) will all go bankrupt due to to tight supply and lower energetic value and by this fuel-demand. A collateral that also increase in collateral value each month (no other collateral delivers a value increasing). Investing in fuel demanding power generation is something only bankers with no sense of the current status of both global energy resources and global energy demand will do. The same knowledge-deficit ones that bought CDOs after everyone with market knowledge want to sell them. Energy as Collateral is a concept capable of generating a massive energy transition investment wave.


Author: Gijs Graafland


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