Insights

4 Trends in Sustainable and Clean Energy Finance for 2021

From battery storage, to electric buses, to sustainable materials, here are some clean energy finance trends to keep an eye on.

In his first year in office, President Joe Biden has been bullish on his plans to combat climate change. In April, the White House announced plans to reduce the United States’ greenhouse gas emissions by 50-52% from 2005 levels by 2030 and to reach net-zero emissions by 2050. Part of those plans involve building out sustainable infrastructure to support these plans, such as battery storage for wind and solar power and building out electric vehicle charging stations.

State and federal policies like these will shape and speed up trends in sustainability and renewable energy, believes Don Danh, managing director of clean tech at East West Bank.

“The way we identify new opportunities, we're almost always looking at what the regulatory requirements are going to be,” says Danh. “We were looking at all the state level and federal level, in terms of what they would be requiring of the states to go green.” For example, California passed a law in 2014 that required businesses to recycle their organic waste, which led to increased demand for and investment in anaerobic digestion plants that produce a renewable energy called biogas.

From battery storage, to electric buses, to reducing carbon emissions, here are some industries that Danh believes will see an uptick in interest and opportunities.

1. Battery storage

One of the biggest areas of interest is battery storage, says Danh. In the Annual Energy Outlook 2021, the U.S. Energy Information Administration reported that a significant number of battery storage systems will be added to the U.S. power grid. Battery storage capacity is a key component to meeting Biden’s clean energy goals; they can store energy generated by intermittent sources such as wind and solar, and help prevent brownouts and blackouts caused by overloaded power grids.

“When it comes to batteries, utility companies love it because it helps them manage the load,” says Danh. “What they hope to do is have more people sign on to battery storage, so at some point either they or somebody else in the investment community will start building the capacity to have a virtual battery storage network.”

Danh adds that one of the reasons utilities are interested in such battery storage networks is to cut down costs on maintaining power plants.

“Right now, [regulators require them] to build a redundancy plant, which costs a lot of money and which they might be able to use maybe five or six times a year during the summer when there’s a surge,” he says. However, with battery storage networks, utilities companies may be able to better see energy usage capacity and use that information to cut costs on building and maintaining such power plants.

2. Carbon reduction

Part of Biden’s climate plan involves reducing the United States’ carbon emissions through a variety of initiatives, such as boosting energy efficiency in automobiles and buildings, and setting performance standards for firms. For instance, in 2015, the dairy industry alone contributed 3.4% of global greenhouse gas emissions, which are mainly comprised of methane, carbon dioxide and nitrous oxide. Methane is particularly detrimental to the environment, since it is more efficient at trapping heat in the atmosphere.

U.S. dairy wants to become carbon neutral or better by 2050. Policy planners are also requiring other companies in certain highly polluting industries to adopt greener practices to reduce their carbon footprint. As a result, businesses that help reduce or capture methane gases and even turn those gases into renewable energy are at the forefront.

Danh explains, “From a policy planner perspective, both parties, the Democrats and the Republicans, are very supportive on areas like using renewable energy.”

3. Electric buses

Under Biden’s climate plan, the administration wants to provide “every American city” with zero-emissions public transportation, which ranges from light rail networks, to improving transit and bus lines. In 2020, fifteen states including California, Colorado, Massachusetts and Hawaii signed a multi-state agreement to have 100% of medium and heavy-duty vehicles be electric by 2050. Back in 2018, California passed legislation to transition its bus fleets to 100% zero-emissions by 2040.

“We have the push in states like California to either convert or retrofit their gas-guzzling buses, to be going electric or to come up with a budget to replace these gas-guzzling buses [with] electric buses starting 2023,” Danh says.

4. Sustainable materials

Another emerging industry is sustainable materials, particularly products made from hemp or corn, believes Danh. Although it could take another three to five years for sustainable materials to truly gain momentum, Danh thinks it will be a major area of interest for both investors and policy planners.

“People will have clean materials replace plastic,” he says. “Car parts are going to come from hemp. It’s going to be stronger, cheaper, lighter than carbon fiber. So, I think that three years from now, you will see the beginning of the building out of sustainable material opportunities.”

Investment in sustainable materials will likely require cross-border collaboration between the U.S. and China, Danh adds. “I think that China is way ahead of us when it comes to industrial hemp and has been years ahead of us,” he states. “I believe that industrial hemp will be all about cross border. What I'm seeing are China-based and Asia-based companies that are in the industry, they're going to get into it—some of them have started to look into that space already.”