Structuring the Clean Energy Investment Trust

The report argues that traditional utility and project finance models are inefficient for renewable energy because they do not align with the specific risk-reward profiles of wind and solar assets. It proposes the Clean Energy Investment Trust (CEIT), a liquid, exchange-traded vehicle targeting liability-hedging investors (such as pension funds and insurance companies) by offering investment-grade, bond-like returns. To achieve this, the CEIT unbundles project cashflows into four streams: construction finance, predictable contracted cashflows (the CEIT core), volatile 'surplus' cashflows, and 'tail' cashflows occurring after the fixed-price regime expires. By using risk-mitigation tools—including diversification of 5-10 assets, conservative P75-P95 production estimates, and long-term O&M contracts—the model claims it can reduce the cost of wind-generated electricity by 15-17%.

• The proposed CEIT model can reduce the cost of wind-generated electricity by 15-17% compared to traditional utility financing practices.
• To achieve an investment-grade risk profile attractive to liability-hedging investors, a CEIT should utilize a diversified portfolio of 5 to 10 equally sized, uncorrelated projects.
• The CEIT should base its promised returns on conservative production estimates, specifically those that would be exceeded in 75% to 95% of years (P75-P95).
• The model identifies four distinct cashflow profiles for renewable projects: asset development and construction, predictable long-term contracted cashflows, volatile surplus cashflows during the contract phase, and post-contract 'tail' residual value.
• A 'surplus' investor product can be created from the volatile upside of the project, which is estimated to be worth 1-2% of the CEIT's value and targets investors seeking returns of 12% to 18%.
• The 'tail' investment, covering the period after fixed-price contracts expire, represents approximately 5% of a typical project's total value at inception and can be used to guarantee the CEIT's cash reserve.
• Essential risk-mitigation tools for the CEIT include long-term full-service O&M contracts, a purchase price adjustment facility active for 24 months, and a cash reserve sized to cover at least six months of expected distributions.
• The CEIT differs from YieldCos primarily by prohibiting the buying or selling of projects once the portfolio is set, thereby removing growth premiums and associated management risks.
• Implementing this financial innovation could potentially increase the institutional capital available for renewable energy investment by a factor of 13, reaching nearly $4 trillion.

APA

Varadarajan, U., Huxham, M., O’Connell, B., Nelson, D., Posner, D., & Pierpont, B. (2017). Structuring the Clean Energy Investment Trust. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2017/08/August-2017-CPI-Energy-Finance-CEIT-Structuring-report-final.pdf

Chicago

Varadarajan, Uday, Matthew Huxham, Brian O’Connell, David Nelson, David Posner, and Brendan Pierpont. Structuring the Clean Energy Investment Trust. Climate Policy Initiative, 2017. https://www.climatepolicyinitiative.org/wp-content/uploads/2017/08/August-2017-CPI-Energy-Finance-CEIT-Structuring-report-final.pdf.

Wikipedia

{{cite report |last1=Varadarajan |first1=Uday |last2=Huxham |first2=Matthew |last3=O’Connell |first3=Brian |last4=Nelson |first4=David |last5=Posner |first5=David |last6=Pierpont |first6=Brendan |title=Structuring the Clean Energy Investment Trust |publisher=Climate Policy Initiative |date=August 2017 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2017/08/August-2017-CPI-Energy-Finance-CEIT-Structuring-report-final.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{varadarajan2017structuring, author = {Varadarajan, Uday and Huxham, Matthew and O’Connell, Brian and Nelson, David and Posner, David and Pierpont, Brendan}, title = {{Structuring the Clean Energy Investment Trust}}, institution = {Climate Policy Initiative}, year = {2017}, month = aug, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2017/08/August-2017-CPI-Energy-Finance-CEIT-Structuring-report-final.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }