While no business is completely immune to broader macro events around it, we believe that the resiliency inherent in Greenbacker’s renewable infrastructure assets places us in a position to benefit from the flight to quality phenomenon generally associated with periods of market volatility. Moreover, our major banking relationships are with JPMorgan and CitiBank, two of the four largest banks in the US.

Given those partnerships and the resilient nature of our sustainable infrastructure investments, we believe in our ability to continue executing our strategy and delivering value for our shareholders.

An essential service provided by a well diversified fleet

Sustainable infrastructure assets like those in Greenbacker’s clean energy fleet provide communities and businesses with an essential service: electric power. The diversified nature of our assets—by way of technology type, geography, and counterparty—and our contractual arrangements for the sale of the electricity we generate means that our cashflows are generally insulated from changes in the broader economic environment.

Our fleet is generating electricity every day, which is then sold under long-term contracts to utilities, municipalities, and large corporations. Our current average contract is approximately 18 years. The price of that sale is typically agreed upfront on the basis that the counterparty will buy 100% of the power we produce. Because utilities and municipalities tend to operate as monopolies in their respective service areas, where they provide essential services to their customers, they also tend to enjoy high credit ratings. Additionally, we have intentionally diversified the technology (e.g., wind, solar, energy storage) and geography of our project fleet across the country so that we can minimize the impacts of local weather events and seasonality on our cashflows.

Direct exposure to SVB and Signature is immaterial to none at all

We have also been closely monitoring the situation surrounding SVB and Signature to ensure that we remain abreast of any developments that could impact Greenbacker or our broader business counterparty interests. So far, none of our counterparties have reported any material impacts, while Greenbacker’s own exposure ranges from negligible to none.

Our independent power production business segment had no deposits at either bank. Within our investment management business segment, Greenbacker Capital Management currently serves as the registered investment advisor to five funds. Four of those funds have no direct exposure to SVB or Signature, at either the fund level or across any of their investments or portfolio companies. Though one fund did have a small amount of non-FDIC insured cash on deposit with SVB, we believe the US government’s recent guaranty of deposits has mitigated the risk on that exposure.

Focusing on our mission

We will actively monitor the situation as it continues to evolve. At the same time, we will also remain focused on what we do best: empowering a sustainable world by connecting individuals and institutions with investments in clean energy.

Given the quality of the cashflows generated by our investments and the historic tailwinds our industry is enjoying from recent federal government initiatives designed to encourage investment in the sector, we believe Greenbacker remains well positioned to execute on that mission.

We believe that the stability and inherent resiliency of the sustainable infrastructure asset class continues to represent a compelling opportunity to investors looking for stable long-term returns and insulation from short-term volatility.

The information presented herein may involve Greenbacker’s views, estimates, assumptions, facts, and information from other sources that are believed to be accurate and reliable and are, as of the date this information is presented, subject to change without notice.

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Opportunity for steady income & hedge against inflation

The infrastructure asset class tends to enjoy less exposure to market movements and inflationary pressure than other segments of the market, performing well during inflationary periods regardless of growth backdrop.

Infrastructure assets, such as power plants, are often funded via long-term contracts, which helps insulate them from the phases of the economic cycle. Because consumption of water, heat, and power don’t generally fluctuate significantly across the economic cycle, infrastructure investments can offer an opportunity for steady income across market environments.

In addition to providing essential services to communities through long-term contracts, infrastructure assets also tend to have Consumer Price Index-linked costs and prices, giving them a natural hedge against the effects of inflation.

Infrastructure’s historical average annualized performance amid high inflation

Policy catalysts

Infrastructure has delivered consistent returns throughout market cycles and, heading further into 2023, renewable infrastructure is set to benefit from historic policy tailwinds.

The Inflation Reduction Act (IRA) passed in August 2022 provides $369 billion to reduce greenhouse gas emissions, improve US energy security, and increase domestic investment, development, and employment in the clean energy sector. Although markets are awaiting guidance from the IRS regarding the exact implementation of certain IRA provisions, this landmark legislation—coupled with other recent policy support—makes it clear that the energy transition is a priority for the world’s largest economy.

Many of the IRA’s clean energy investments will work hand in hand with the Bipartisan Infrastructure Investment and Jobs Act, passed in late 2021, to spur sustainable infrastructure deployment. Among other areas, this includes support for electric vehicle charging infrastructure, modernization of the electric grid, and energy efficiency upgrades.

Moreover, 36 states and Washington, DC have established either renewable portfolio standards or renewable energy goals to drive the clean energy transition at the state level.¹ For a dozen of those states, plus the nation’s capital, these targets include 100% clean power by 2050 or sooner.

Corporates are also increasingly setting clean energy targets for themselves. At least 60% of the Fortune 500—including 76% of the largest companies in the Fortune 100—have adopted one or more emission reduction, energy efficiency, renewable energy, or net-zero goals.² Additionally, a number of the country’s largest utilities have voluntarily committed to net-zero carbon by 2050.^{3 4}

Pickup in 2023

The lingering pandemic-related supply chain issues impacting the infrastructure asset class and renewable energy industry continued to improve in 2022. Greenbacker and other market participants welcomed the US government’s two-year moratorium on solar tariffs—after a tariff petition put an unexpected pause on US solar development—as well as the administration’s invoking of the Defense Production Act to boost domestic solar panel production.

Even amid challenges, global infrastructure fundraising hit a record-high $148 billion across 59 infrastructure, renewable energy, and energy transition funds last year (topping the $103 billion raised in 2021).⁵ BloombergNEF recently reported that energy transition investments around the globe surpassed $1 trillion in 2022, of which the US accounted for $141 billion.⁶

From a power production perspective, although the US solar industry added less new capacity in 2022 than it did in the record-high 2021, those numbers are expected to increase steadily over the next few years. By 2027, it’s estimated that new solar installations in the US will be double what they were in 2021, amid an increasingly supportive market landscape for renewables.⁷

A confluence of powerful tailwinds

The infrastructure and renewable energy asset classes sit squarely at the intersection of energy resilience and the energy transition.

Investing in infrastructure and renewable assets during periods of market uncertainty can be a strategic move that offers investors the opportunity for both diversification and insulation from short-term volatility, while meeting growth objectives in the long term. These assets provide an essential service often funded by long-term contracts and can offer steady income with inflation-mitigating return characteristics.

The space is benefiting from a confluence of powerful tailwinds—a backdrop that investors seeking to diversify their alternative or fixed income alternative portfolios can capitalize on.

1 Renewable energy explained – Portfolio standards, US Energy Information Administration.

2 Power Forward 4.0: A progress report of the Fortune 500’s transition to a net-zero economy, World Wildlife Fund, June 2, 2021.

3 The 5 Biggest US Utilities Committing to Zero Carbon Emissions by 2050, Greentech Media, Jeff St. John, September 16, 2020.

4 Arizona Electric Utilities Voluntarily Commit to 100% Clean Energy, Arizona Corporation Commission.

5 2022 Fundraising Report: As another record falls, smaller LPs may join the fray, Inframation News, Pablo Martinez, January 24, 2023.

6 Global Low-Carbon Energy Technology Investment Surges Past $1 Trillion for the First Time, BloombergNEF, January 26, 2023.

7 After a Bumpy Year, Renewable Energy Looks Poised for Boom Times, Wall Street Journal, Dieter Holger, December 29, 2022.

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1 “Turning Sunlight into Fuel,” Columbia Climate School, Renee Cho, August 24, 2016.

2, 3 U.S. Solar Market Insight, Solar Energy Industries Association, as of December 13, 2022.

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Battery storage developers, and project owners like Greenbacker, are able to capitalize on multiple revenue models—as well as several incentive programs—to maximize returns. This applies to energy storage projects that act in concert with renewable generation or on their own to help stabilize the grid.

Revenue models for battery storage

Co-located solar and storage – The most common market use case for power storage is to pair a battery with a solar plant, enabling a utility or commercial customer to dispatch power when needed or when most economically favorable. The storage project receives a fixed payment on a per megawatt-hour (MWh) basis, with contract tenors ranging from 10 to 20 years.

Tolling agreements – Similar to wind and solar energy contracts, standalone storage projects enjoy long-term purchase agreements, called tolling agreements, that provide stable cash flows to the projects in exchange for a certain number of charging/discharging cycles per day. Contracts are structured similarly to co-located projects, on a fixed MWh basis for a tenor of 10 to 20 years.

Frequency regulation – Under a frequency regulation service arrangement, storage projects respond to grid requests to provide immediate power to maintain generation-load balance on the grid and prevent frequency fluctuations. The US grid uses alternating current that must be kept within tight frequency bounds (around 60 Hz); if electricity demand increases suddenly, it can cause grid frequency to fall, while excess power supply can cause a frequency jump. Grid operators compensate battery providers in the form of a fixed payment to absorb or discharge excess electricity to maintain grid stability.   

Capacity payments – Storage projects are also eligible to participate in wholesale electricity markets such as capacity markets, where generators are compensated by the grid operator in exchange for delivering generation when requested. Capacity prices are set on a one- to three-year basis, and are based on the value the grid ascribes to their contribution to the network or their eligible load carrying capacity. Select markets also have daily or monthly markets. In California, capacity market participation takes the form of a resource adequacy contract, as state regulations require that utilities ensure sufficient capacity to meet customer demand.           

Energy arbitrage – In addition to the relatively stable cash flows generated by the agreements above, battery storage projects can also take advantage of charging and discharging electricity when it’s economically favorable to do so, selling into the wholesale electricity market and generating incremental revenue. In the short term, while the number of storage assets in the market is relatively low, this energy arbitrage revenue stream can be incredibly valuable to project economics, generating trading revenue to supplement core revenue.

Policy incentives for battery storage

Federal incentives – Added to solar projects, storage projects can currently recoup up to 30% of their investment by claiming the investment tax credit (ITC), which enables cost-competitive end-user pricing for storage and encourages increased adoption. Under the Build Back Better plan, standalone storage projects will also be able to claim the ITC, providing further support to the sector.

State incentives – States like California, New York, and Illinois have announced large procurement programs for co-located and standalone batteries to accelerate the transition to an electricity-based economy and reduce the near-term strain on the grid. For the longer term, states are already gearing up to invest in transmission to accommodate additional new generation for a decarbonized economy, with the California Independent System Operator (CAISO) alone signaling the need for over $30 billion of investment to develop transmission capacity over the next 20 years.³    

The growth opportunity for storage

Storage is critical to achieving broader decarbonization goals and advancing towards an electric economy. Its central role in the clean energy transition means that investment opportunities will continue to expand as new technologies and market models emerge, creating multiple commercialization approaches as well as a compelling growth opportunity for investors.

1 Electricity in the United States, U.S. Energy Information Administration (EIA), February 2022.

2 Electricity Generation, Capacity, and Sales in the United States, EIA, February 2022.

3 20-Year Transmission Outlook, California ISO, January 31, 2022.

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• The land over a capped landfill has heavy usage restrictions¹ and can often sit idle for years. Renewables can give new purpose to these sites.
  

1 Kim Slowey, “Land(fill) of opportunity: Why builders are turning dumps into new developments,” Construction Dive, July 5, 2016.

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Agrivoltaics refers to the practice of utilizing a site for both solar photovoltaic power generation and agricultural activities. This dual land use not only contributes to a more sustainable future, it also provides bilateral benefits for each endeavor.

Crop production + power production

The land under and around solar panels can fulfill a wide variety of agricultural functions. It can be used for food growing, beekeeping, animal husbandry, or even installing greenhouses. Another option is planting habitat that supports pollinator populations, like bees and butterflies, which have been declining due to insecticide use, climate change, and human encroachment.

Pollinator-friendly vegetation also has advantages for crop production, both onsite and in neighboring fields. It’s not uncommon for nearby farmers to see an increase in their crop yields thanks to the greater number of pollinators venturing over to fertilize their crops. Solar sites can also be used as forage for local farmers to graze their livestock. Promoting regenerative agriculture through rotational grazing not only cuts down on site maintenance costs, but builds healthy soil.

These plants improve soil stability and remove carbon from the atmosphere. Their longer root systems help mitigate erosion, storm water runoff, and frost heaves, while sequestering substantial amounts of carbon below ground.

Benefits for solar companies, benefits for local communities

As an organization that builds durable partnerships to drive a clean energy future, Greenbacker is thrilled at the ecological benefits agrivoltaics can provide. As long-term owner-operators, we have a vested interest in how it financially benefits both our fleet of solar energy assets and the local communities our projects will call home for multiple decades.

Because agrivoltaic practices tend to replace the traditional turf grass groundcover installed on solar sites, they help reduce operation and maintenance costs. Grazing sheep can reduce onsite costs associated with both mowing and dethatching (i.e., breaking down dead vegetation). Planting pollinator habitat reduces other vegetation and pest management expenses—particularly compared to the more maintenance-heavy turf grass—more than offsetting its upfront planting expenses. It’s even been found that the cooler microclimates this habitat generates can improve solar panel efficiency.¹

Agrivoltaics projects can also provide additional revenue streams in the community. Local landowners can receive land lease payments for projects built on their property. Farmers can supplement their income by leasing their sheep or cows to graze a solar site; at the same time, they reduce their own livestock feed costs, as well as wear and tear to their own pastureland. Municipalities also stand to gain additional tax revenue from these projects.

The economics of widespread agrivoltaics

While its positive impact is clear, understanding the specific economics and logistics of agrivoltaics is necessary to effectively—and sustainably—deploy it at scale in our fleet and across the industry. Greenbacker is working with some of the country’s top researchers to do just that. 

We’re collaborating with the National Renewable Energy Laboratory and Argonne National Laboratory on the Solar Practices Integrated with Rural Economies and Ecosystems (InSPIRE) project. This study seeks to quantify the benefits that pollinator-friendly solar projects have on local agricultural yields, as well as how low-impact solar can improve a site’s soil quality, carbon storage, stormwater management, microclimate conditions, and solar efficiencies.

Our 88-acre solar project in Sturgis, MI is part of a three-year study by Argonne National Laboratory and the Energy Resources Center at the University of Illinois at Chicago. The purpose of this research is to develop decision-making tools for solar-pollinator habitat projects. Guidance such as planting manuals, cost/benefit calculators, and native seed-mix selection tools can help address critical stakeholder concerns such as project cost, return on investment, and site-specific constraints.

Project design with agrivoltaics in mind

Greenbacker prioritizes agrivoltaics and other nature-based land management solutions at every stage of a renewable energy project’s life cycle, from contracting and permitting to construction and power production.

We design sites with rows that are wide enough to accommodate agricultural maintenance equipment and with appropriate vegetation to accommodate panel height. We build in land access for farmers to bring their livestock and beekeepers to tend to their apiaries. We ensure secure fencing to protect grazers from predators.

We take those steps because agrivoltaics is a crucial component of a sustainable future. It’s a triple-bottom-line scenario with financial, environmental, and social benefits for ourselves and the communities our projects operate in. And with roughly 370 million acres of agricultural farmland set to change hands as farmers retire over the next ten to 15 years,² there’s a huge opportunity on the horizon. Not only can agrivoltaics help protect the livelihood of rural communities by increasing farmland resilience and promoting regenerative agriculture, but it can build a cleaner, cheaper future for the agriculture and energy industries.

1 Kirk Siegler, “This Colorado ‘solar garden’ is a farm under solar panels,” NPR, November 14, 2021.

2 “2021 Transition Recommendations,” American Farmland Trust.

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• Supportive policies and momentum from projects in key markets² are set to accelerate growth in installed gigawatts (GW) of battery storage capacity through 2030.

• In 2021, global energy transition investment totaled $755 billion, according to BloombergNEF’s Energy Transition Investment Trends 2022.

• Investors understand that the renewables investment opportunity set has expanded beyond wind and solar power to encompass a wider clean energy ecosystem, including storage, energy efficiency, and sustainable materials—sectors that have seen record investment in recent years.
  
  

¹ Lazard’s Levelized Cost of Energy Analysis, 2021.

² “Global Energy Storage Market Set to Hit One Terawatt-Hour by 2030,” BloombergNEF, November 15, 2021.

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Recently, a tariff petition from a tiny US-based solar panel manufacturer threatened to bring US solar development to a halt. Auxin Solar¹ requested that new tariffs of up to 250 percent² be levied on solar imports from Malaysia, Thailand, Cambodia, and Vietnam—countries that accounted for over 80 percent of all solar panel imports in 2021.³ As a result, many new US solar projects were stalled, or even scrapped, as manufacturers facing the risk of new tariffs considered exiting the US market altogether.⁴

A week ago, the Biden administration stepped in to bring some relief, instituting a two-year moratorium on solar tariffs from these countries and invoking the Defense Production Act to boost domestic production of solar panels.⁵

This is a step in the right direction, as we absolutely need to encourage solar energy development—while at the same time encouraging US solar panel manufacturing—to mitigate the climate crisis. We are over reliant on Chinese production, which makes our supply chains vulnerable to trade wars and global pandemics, but that reliance is not going to end overnight.

The US used to be a world leader in solar manufacturing. American engineers invented the solar cell⁶ in 1954 at Bell Labs. In the 1980s, the US spent more on solar research and development⁷ than any other country in the world. As recently as 2010, we were a net exporter⁸ of solar panels. In contrast, China didn’t begin⁹ manufacturing solar panels until 2002. Yet substantial government incentives allowed China’s solar power market to grow dramatically: The country became the world’s leading producer of solar panels in 2010.¹⁰

This coincided with a precipitous decline in panel production in the US. In 1990, US firms produced 32 percent of solar panels worldwide; by 2005, they made only nine percent.¹¹ Without the same level of national investment, we could no longer compete in the global market.

And so the tariffs began. The US accused China of providing unfair subsidies, claiming that Chinese companies were dumping solar cells¹²—selling them at less than the cost to manufacture them—to drive out competition. In 2012, the US placed its first¹³ tariffs on Chinese solar cells and modules. In 2018, the government instituted the Section 201 tariffs to give domestic manufacturers temporary relief from the “serious” injury¹⁴ that imports were causing them. This past February, President Biden eased some restrictions, but renewed the Section 201¹⁵ tariffs for four more years.

However, tariffs have not historically resulted in increased domestic solar panel production; deterrents to trade abroad don’t make up for lack of investment at home.

Imagine if the US had made the same effort as China to support a domestic solar manufacturing industry. We would be more competitive in global markets. We would have more cheap solar power available at home. And, in a global pandemic, we would be less reliant on foreign exports and energy.

It’s also worth noting that most solar jobs in the US are associated with building projects, not with manufacturing solar equipment (which accounted for only 31,000 jobs, or 13% of domestic solar industry jobs¹⁶ at the end of 2020). Without the Section 201 tariffs, the US would have installed 11% more solar, employed 62,000 more people, and had $19 billion more in investment,¹⁷ according to the Solar Energy Industries Association, a US solar trade group.

In addition to ending tariffs, we should be offering incentives to encourage manufacturing in the US. Senator Jon Ossoff’s proposed Solar Energy Manufacturing for America Act¹⁸ offers tax credits to US solar manufacturers, and the America COMPETES Act¹⁹ authorizes $3 billion to fund the establishment of a domestic solar manufacturing supply chain. Plus, investing in solar energy has been a winning proposition for taxpayers. Since 2016, no solar project that was approved for funding from the Department of Energy’s Loan Programs Office has missed a payment.²⁰ These projects are projected to generate a minimum of $5 billion in interest²¹ for taxpayers. They’ve already reduced carbon emissions by an amount equivalent to taking 14 coal-fired power plants offline for a year.

Greenbacker joins the solar industry in expressing relief that the Biden administration has taken action, and we’re thrilled that the pause on tariffs has gotten stalled projects moving again. But these steps should be just the beginning.

An ambitious plan to cultivate US solar manufacturing will bring jobs home, decrease our reliance on imports, and meet the climate crisis with carbon-free power. The US government has historically invested in the future, and the future of energy is renewable.

1 “An Analysis of the Auxin Petition and Commerce Investigation and Their Impact on the Solar Industry,” The National Law Review, March 30, 2022.

2 “Tariff Review Could ‘Smother’ US Solar Industry, Energy Secretary Warns,” SparkSpread, May 5, 2022.

3 Solar panel import duties, Norton Rose Fulbright, Project Finance, Keith Martin, February 28, 2022.

4 “Solar Industry ‘Frozen’ as Biden Administration Investigates China,” The New York Times, David Gelles, April 29, 2022.

5 “FACT SHEET: President Biden Takes Bold Executive Action to Spur Domestic Clean Energy Manufacturing,” The White House, June 6, 2022.

6 APS News, Volume 18, Number 4, April 2009.

7 “Why America Doesn’t Really Make Solar Panels Anymore,” Robinson Meyer, The Atlantic, June 15, 2022.

8 “US Solar Industry Was Net Global Exporter by $1.9B in 2010, According to GTM Research and SEIA,” Greentech Media, August 29, 2011.

9 “Solar Energy in China: The Past, Present, and Future (ucsd.edu),” Huizhong Tan, China Focus, February 16, 2021.

10 “When Solar Panels Became Job Killers,” Keith Bradsher, The New York Times, April 8, 2017.

11 “Why America Doesn’t Really Make Solar Panels Anymore,” Robinson Meyer, The Atlantic, June 15, 2022.

12 “U.S. Slaps Tariffs on Chinese Solar Panels,” Keith Bradsher and Diane Cardwell, The New York Times, May 17, 2012.

13 “U.S. sets new tariffs on Chinese solar imports,” Matt Daily, Reuters, May 17, 2012.

14 Understanding Safeguard Investigations, United States International Trade Commission.

15 “Biden admin eases Trump-era solar tariffs but doesn’t end them,” Jarrett Renshaw and Nichola Groom, Reuters, February 4, 2022.

16 “To understand why Biden extended tariffs on solar panels, take a closer look at their historical impact,” The Conversation, April 6, 2022.

17 The Adverse Impact of Section 201 Tariffs, Solar Energy Industries Association, December 2019.

18 “Sen. Ossoff Successfully Negotiates Inclusion of Solar Manufacturing Bill in Budget Measure,” October 28, 2021.

19 “America COMPETES Act of 2022 authorizes $3 billion for domestic solar manufacturing,” Kelly Pickerel, Solar Power World, January 26, 2022.

20 “Biden could prove the Solyndra scandal wasn’t a failure,” Tim McDonnell, Quartz, February 4, 2021.

21 “Biden could prove the Solyndra scandal wasn’t a failure,” Tim McDonnell, Quartz, February 4, 2021.

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