Jigar Shah's Clean Energy Revolution

Solar is too expensive!

Well, at least the up-front costs can be prohibitive.

Sure, over the life of the 20-year warranty of a solar power system, the initial investment will pay off. It’s nearly impossible to not come out ahead.

But still, coming up with a big chunk of cash up front is not something most Americans can afford to do. And this has been a huge obstacle for sellers of solar.

Now for years, I would often hear from solar advocates that the only thing really holding the industry back is the lack of financing.

While I would argue that government intervention and the lack of a real free market in the energy space have been the main culprits behind solar’s long struggle to greatness, it’s true that financing has also been a real headache.

On the retail level, most folks who want to go solar — and actually own the systems instead of leasing them — can’t pay cash. They have to seek out loans from a bank. But most banks offer pretty unflattering terms, assuming they even have any interest in offering the loans at all.

As a result, over the past couple of years, we’ve started to see a number of companies and crowdfunding operations offering direct loans to customers. Perhaps one of the most well publicized was SolarCity’s (NASDAQ: SCTY) MyPower program, which offers customers direct loans for SCTY installations that also come with the company’s 30-year warranties, production guarantees, and monitoring.

Vivint Solar (NYSE: VSLR) has a program through which homeowners can simply allow the company to use their roof real estate to generate solar and send it to the grid. Homeowners don’t have the benefit of owning the system outright, but they do get to lock into rates that are competitive with local utilities. Over the long term, these systems will enable customers to save a decent amount of money on electricity costs.

These are just two examples of how ingenuity has overcome financing concerns on the retail level.

Of course, moving beyond retail solar, there’s still a mountain of new energy technologies that simply need adequate funding to get off the ground.

And until recently, the pool of available capital has really been monopolized by those who simply don’t understand the technologies or think the potential returns are just too small to be considered.

But that’s about to change in a very big way.

A Track Record of Success

While you may not know his name, he’s probably the biggest thing in the clean energy space — not quite as well known as Elon Musk, but certainly with a long history of success in cleantech.

His name is Jigar Shah, and his launch to fame began with SunEdison — a company he founded in 2003 and that now boasts a market cap of $5.6 billion.

I actually love this quote about him and his company…

SunEdison simplified solar as a service through the implementation of the power purchase agreement (PPA) business model. That model changed the status quo, allowing organizations to purchase solar energy services under long-term predictably priced contracts and avoid the significant capital costs of ownership and operation of solar energy systems. The SunEdison business model is a recognized catalyst that helped turn solar PV into a multi-billion dollar industry worldwide.

Those who work in the clean energy industry all know who Shah is, and most will agree that he is one of smartest clean energy entrepreneurs on the planet. Certainly his track record of success in this space backs such a claim.

But I’m not here today to wax poetic about Jigar Shah. Instead, I want to tell you about Shah’s next big investment, which I believe will once again offer a huge disruption to the energy space.

A Resource Revolution

Shah is now the President and co-founder of Generate Capital.

Generate Capital is a specialty finance company that builds, owns, operates, and finances infrastructure assets involving the world’s critical resources: energy, water, agriculture, and basic materials.

Its management team has decades of collective experience financing billions of dollars of sustainable infrastructure.

Management believes the world’s fourth industrial revolution — a “resource revolution” — is underway, where the world is finding new, profitable ways to do more with fewer of our precious or constrained natural resources.

Unlike traditional capital sources, Generate Capital has the people, systems, and flexibility that make it the most sophisticated capital partner for technology manufacturers, project developers, and contractors driving this resource revolution.

Essentially, Generate Capital is going to make hundreds of investments as small as $1 million each. And the result is going to be hundreds of new, highly disruptive companies entering the market… well capitalized.

This is going to force many of the clean energy stalwarts to stay on their toes, as these investments will facilitate the competition necessary to take alternative energy to the next level.

And yes, dear reader — the next level is right around the corner. But unlike a good portion of the alternative energy opportunities in which we invest today, I suspect it’s the superior energy tech plays that are going to benefit the most from Generate Capital and this new wealth of capital that’s about to lift many of these companies out of the darkness.

As we get ready to head into 2015, pay close attention to the first round of projects Generate Capital announces. The first of these announcements is expected in Q1 2015.

The companies that get the Jigar Shah seal of approval could certainly be the next big players in the energy space. And certainly I’ll be looking to invest accordingly.

To a new way of life and a new generation of wealth…

Jeff Siegel

Check us out on YouTube!

@JeffSiegel on Twitter

Jeff is the founder and managing editor of Green Chip Stocks. For more on Jeff, go to his editor’s page.

Want to hear more from Jeff? Sign up to receive emails directly from him ranging from market commentaries to opportunities that he has his eye on.