Tremendous growth in renewables spawns a greener middle market
From 2010 to 2019, investment in renewable energy soared to $2.6 trillion, triple the amount invested in the previous decade, and the sector is poised to continue growing at a rapid pace, according to BloombergNEF.
Much of that growth is occurring in the middle market, as lower costs for green infrastructure have made smaller organizations more interested in reducing both their carbon footprint and their energy costs.
We’ve seen a tidal wave of investment flow into the space driving increased asset value and M&A activity.
- Ari Citrin, Managing Director of the KeyBanc Capital Markets renewables team
“We’ve seen a tidal wave of investment flow into the space driving increased asset value and M&A activity,” says Ari Citrin, Managing Director of the KeyBanc Capital Markets® renewables team. “There’s significant momentum and enthusiasm for renewable energy from consumers to corporations, on the policy side, and ultimately from the capital markets and investor universe.”
While the market has slowly embraced renewables for the past decade, the shift has accelerated over the past 18 months, Citrin says, as more financial institutions are raising funds to invest in renewables and climate change.
“The industry is going from what many viewed as niche to being considered a real and essential energy transition,” he says.
While many financial institutions are just getting into the renewables space, Key has helped clients transition to renewable energy for nearly 15 years. The bank has been investing in renewable power generation in the United States since 2007 and is one of the largest U.S. lenders to the wind and solar sectors. Over the past decade, they are responsible for financing more than $15 billion in renewable investments.
Renewable expertise and local knowledge is a powerful combination
Part of the reason that KeyBank has had so much success in the market is its deep experience with both renewables and with the middle-market, regional companies that have been so active in the space.
“The companies developing, constructing and operating the projects are not global firms—they’re regional, middle-market and, in many cases, family-owned businesses,” Citrin says. “That’s also true of the end users; those consuming the electricity. You have an abundance of middle-market corporations that are looking to become more green to meet their environmental, social, and governance (ESG) goals.”
The nature of local utilities and regulations also requires a regional approach to renewables, as investments often require on-the-ground contract negotiations with providers and interactions with local permitting agencies.
The road ahead for renewables
Looking ahead, KeyBank will continue to help middle-market companies in their efforts to become greener. Among its areas of focus are battery storage projects, electric vehicles and the new hydrogen economy, as middle-market customers become more sophisticated in their knowledge of renewables and the options available to them to meet their sustainability objectives.
The conversations have gone from, ‘Well, tell me about solar and what its benefits might be,’ to, ‘We have a number of solar installations now, I’m adding storage and also looking into other alternatives such as fuel cells.'
- Brian DePonte, Senior Vice President, Key Equipment Finance Clean Energy
“The conversations have gone from, ‘Well, tell me about solar and what its benefits might be,’ to, ‘We have a number of solar installations now, I’m adding storage and also looking into other alternatives such as fuel cells,'” says Brian DePonte, Senior Vice President, of Key Equipment Finance® Clean Energy team.
As middle-market companies continue to find new ways to use green technology to meet business objectives, KeyBank continues to evolve its offerings to help them do that as efficiently as possible—from both a financial and an environmental perspective.