According to Bloomberg, in the coming decades we will see over US$10 trillion invested in new renewable energy generation. If the world truly wants to reach the goals of the Paris Accords, that amount balloons to US$50 trillion. In 2018 alone, over US$300 billion was invested into new renewable energy generation. This was a tipping point as more money was spent in new renewable generation compared to traditional oil and gas. Further to Bloomberg’s research, in the past 10 years, over US$2.2 trillion have been invested into renewables.
Renewables produce energy by harnessing the energy created by the sun, wind, or water, making them an indispensable ally in the fight against climate change. If we truly want to build a more sustainable energy future, then we need to ensure that renewable energy entrepreneurs have access to the capital they need to get their projects off the ground.
That’s why Bernard Tan started RE Royalties. His goal was to introduce royalty financing to transform how renewable energy projects got financed, while allowing socially conscious investors to make an attractive return, protect their capital and grow their investment.
While the royalty business model is well-proven in other industries, and the renewable industry has been in existence for several decades, the combination of the two had not been done before. RE Royalties is the first royalty company to focus solely on the renewable energy sector. They provide capital in the form of a cash payment or loan, in exchange for a percentage of future revenues from operating projects. RE Royalties’ clients retain 100% control of their assets and businesses, and there are no restrictions on how the funds are used.
Many of RE Royalties’ clients have great project opportunities but are too small to secure traditional financing to fund their growth plans. Typically, these projects need $1M – $20M in financing and want to maintain ownership of their assets. “The capital we provide can be considered an “advance” to our client, and the periodic percentage payments can be considered “royalties” to our investors, explains Bernard.
The idea for the business came when Bernard was working with a local clean technology company to help with their financing. The company had a promising technology that looked to harness the kinetic energy from tides and canals to generate clean electricity. Not only did they have the technology to generate clean renewable electricity from an unlimited resource, they had an established development partner, the government was waiting to provide them with permits to install at various sites, and a long-term revenue contract to buy the electricity at a very high price. The only stumbling block was raising capital.
RE Royalties was started to make a difference for future generations and to provide the renewable energy sector an alternative financing method. Bernard contacted Peter Leighton, who was experienced in the renewable energy sector and joined the company as co-founder. RE Royalties officially launched in January 2016 and by March 2016, the company completed its first royalty acquisition on a 102-megawatt operational wind farm in British Columbia, Canada.
Since then, RE Royalties has built a portfolio of 75 royalties on solar, wind and hydro projects operating in Canada, the United States and Europe. These long-term royalties are on over 400 megawatts of projects and play a significant role in combating climate change, as they will displace over 300,000+ tonnes of carbon per year from entering the atmosphere.
“As a finance professional, I have always wanted to do something that would make the world a better place and make money for others,” says Bernard. “As an investor, I have always wanted to find an investment that made a positive impact, provides a strong return, stable distribution, long-term growth and capital protection. While there are some products that check one or a few boxes, I could not find any that checked all five. So, thinking outside the box, I created my own!”
One unique aspect of the royalty financing solution is that the company’s clients have been able to recycle their invested capital into other highly needed development projects that bring significant environmental, health and cost benefits to those less fortunate in other nations. For instance, one of RE Royalties’ client in Ontario used the capital provided to invest in personal portable solar units in Kenya. This has brought clean, affordable electricity to 100,000 families+ in Kenya, while reducing the negative health impacts and high costs of kerosene lamps and diesel generators to those families.
“I have always believed that capitalism and innovation are two of the strongest forces to mobilize change and by bringing more capital and introducing innovation into the renewable industry, we can hopefully slow or even reverse the effects of climate change,” explains Bernard. “We are seeing the early impact of climate change affecting many parts of the world and if we do not do something to slow it, it will have a profound effect on their way of life for generations to come.”
Talia Beckett Davis is the Vice President of Communications and Sustainability at RE Royalties, a company that finances renewable energy projects. Talia holds a master’s degree in international relations from the University of London, England, a bachelor’s degree in communications from Royal Roads University. Talia is also the founder of Canadian Women in Public Relations and American Women in Public Relations (Women in PR North America), a networking organization that brings together senior PR and media practitioners across the Americas. https://www.reroyalties.com/team