Financial Innovations for Infrastructure Finance: The Grid, Renewables and Beyond

By Joel Kurtzman, Laura Segafredo, Brian Vo

The U.S. electrical grid is suffering from more than 25 years of declining investment, and although last year’s federal stimulus bill was a step in the right direction, the $11 billion in authorized funding can’t begin to meet the estimated costs of overhauling this critical infrastructure, says a new report from the Milken Institute.

“Financial Innovations for Infrastructure Finance: The Grid, Renewables and Beyond” proposes new regulatory models and the implementation of financial innovation to harness the capital markets and leverage private-sector investment to make up the difference.

The report outlines several options for new regulatory models and financial innovations that could unlock private investment to update transmission infrastructure, increase capacity to deliver renewable energy to population centers and move toward tomorrow’s smart grid.

Regulatory proposals:

  • Define and implement national sustainability standards.
  • One-stop shopping for regulation.
  • Federally designate “competitive renewable energy zones”/empowerment zones.

Financial proposals:

  • Make more creative use of existing tax credits and loan guarantees.
  • Allow grid operators to use business models like REITs.
  • Establish a revolving fund for green transmission investment projects.

The report is the result of a Financial Innovations LabTM hosted by the Milken Institute with support from the U.S. Department of Agriculture. The lab was held in Washington, D.C., and included economists, authorities on energy policy, utility operators (privately owned and cooperatives), investors, real estate developers, regulators, representatives from technology and infrastructure companies, researchers and scholars

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