Private finance can break down barriers in AFV market
Private finance is playing a critical role in accelerating the deployment of clean energy technologies that will reduce the impacts of our energy use on the global climate. Can some of these innovative financing tools – or new tools – also help spur alternative fuel vehicles (AFVs) and fueling infrastructure?
That’s a question we have set out to answer in a new initiative with the National Association of State Energy Officials. As a first step, we’ve explored some of the key barriers in the AFV market that private investment could help address.AFVs such as electric, fuel cell and natural gas cars, trucks and buses can help improve air quality, reduce oil consumption and reduce the heat-trapping greenhouse gas emissions that are contributing to climate change. But high upfront costs, the lack of widespread fueling options, and consumers’ lack of information are all barriers to market growth.
Sales of electric vehicles in the United States this year were nearly double 2012 levels, thanks in part to public programs and incentives, especially infrastructure build-out through government initiatives, and vehicle purchase incentives. But for AFVs to spread beyond early adopters, more private investment in technology deployment is essential.
Tools that could help mobilize stronger private investment include:
- Leasing: Various leasing plans allow a buyer to avoid high upfront costs while at the same time receiving the advantages of government incentives. An example of this at work is SolarCity, which takes advantage of public solar deployment incentives by leasing rooftop solar panels to homeowners, and passing through some of the value of the incentives in the form of a lower, fixed, monthly payment.
- Performance contracting: Consumers may not be convinced that the lower operational costs and fuel savings of AFVs will make up for the higher upfront costs of these vehicles and the associated private fueling infrastructure.. Energy savings performance contracts, such as those used by Johnson Controls to finance expensive building energy efficiency upgrades, are a possible solution here.
- Clean energy banks: Quasi-public or public financing institutions can leverage limited public dollars to attract private capital for investment in AFVs and fueling infrastructure. New York State recently announced that a finance veteran would head its $1 billion Green Bank, an initiative of the New York State Energy Research and Development Authority. The bank is tasked with breaking down barriers to private finance in clean energy.
Our research shows that private finance can’t fix everything that’s holding back AFVs, but it does show some promise in addressing a number of critical needs.
With our initiative, we aim to unlock private investment and help accelerate AFV and fueling infrastructure deployment.