New Energy Nexus’ Bonanno on Leveraging Capital Investment for Clean Energy Infrastructure

Issue: 
Jon Bonanno

Despite bold mandates at the state and local level, the new energy economy faces significant barriers to implementation at the scale and pace necessary to move the dial on climate change. VX News spoke with New Energy Nexus CXO, Jon Bonanno, on these predevelopment challenges and how the state can support  rapid deployment of clean energy infrastructure while bolstering equitable, sustainable, and community-led economic development in low-income areas of the state. 

Let's start at the highest level of abstraction. What are the current obstacles, from your experience, to developing and scaling these new clean energy technologies in California, especially in underserved areas of the state?

The first things that you'll hear from any renewable energy developer are the predevelopment obstacles: entitlement, site control, permitting and grid interconnect. We are in a moment where capital can go anywhere, but time-consuming and restrictive regulatory processes make it really difficult for developers to bring projects to the state.

We have some very aggressive goals to achieve carbon neutrality, and even carbon negativity, of our full economy, which means transportation, industrial heat, the built environment, and generation need investment. I think the story has almost exclusively focused on clean energy generation, and we're really missing the rest of the pie, and the rest of the pie is quite significant.

What opportunities are there for leveraging funding and incentives that accompany clean energy projects, of the kind you’ve long been involved with, to encourage the kind of impact investments that communities wary of development can support?

The historical view is that the production tax credit (PTC) and the investor tax credit (ITC) has played a critical role in making wind and solar projects, respectively, viable.  We are seeing these Federal programs sunset, which means new financial tool need to be leveraged.  Clean economy stakeholders are well versed in public support for asset deployment.  So, take for example, the new Federal Opportunity Act and the designated areas of that program. There's more than a 70 percent overlap with CARB’s Disadvantaged Community (DAC) mapping and Opportunity Zones, which has enormous potential to leverage investment in GHG reduction, community development, and workforce training while generating the benefits that clean-energy assets themselves have in low-income areas.

There is legitimate concern surrounding opportunity zones and the risk of displacing already marginalized communities by encouraging capital investment in luxury real-estate development as a tax haven for the wealthy. And without guardrails and measurement of impact, frankly that’s who stands to benefit most from the current federal tax structure.

However, communities can encourage, with state and other capital support, the kinds of investment that maximizes social impact and community benefit. By leveraging incentives that come with green infrastructure projects with the funding from capital sources interested in opportunity zone investment, communities can reap not only the economic benefits of development, but also the health and resilience benefits of clean energy infrastructure.

And if it’s a green generation asset, those low-cost, highly resilient electrons are going to serve all of our communities in California, which is a net benefit.

Jon, clearly given your work and the ambitions you're articulating, the goal is to build an equitable, sustainable pipeline of clean energy investment projects. How can California support the kind of impact investment in clean energy programs that yields community health, workforce, and economic benefits for low-income communities?

At the New Energy Nexus, we feel that the state and municipal agencies can be incredibly strong partners in making the place, or, we call it, “setting the table”.

And that means support for predevelopment and reducing the time and money that it takes for clean infrastructure projects to hit the ground. The easiest way to do that would be to provide funding support to offset the costs of California’s— and many municipality’s— extensive predevelopment processes. It could also involve prioritizing grid interconnect for clean energy projects or, at the municipal level, land use prioritization for electrification, mobility, efficiency, green energy generation, or energy storage projects.

I have to take my hat off to David Hochschild and the California Energy Commission, Governor Newsom, Mayor Garcetti, Lenny Mendonca, Phil Washinton, Bruce Katz, and the people at Accelerator for America who are doing really good work around the in-state and around the country to try and put these pieces together.

It's an incredibly interesting moment where California can layer together these benefits for clean energy projects that can propel the state forward.  If the municipal resources predevelop what they want to ultimately see come to fruition in their communities, private capital, labor and community groups will take those projects over the finish line.  A sampling of such clean economy projects could be an energy storage facility, energy efficiency retrofits, electric vehicle charging infrastructure, offshore wind generation, and 4D ocean farming.

At the New Energy Nexus, we work in California, across the United States, in Southeast Asia, China and soon to be in South Asia. The clean economy public leading-private following partnership model that we can create, exercise and prove here in California would be something we could export to our work abroad.  Offsetting vast amounts of GHG emissions half way across the globe through foreign governments using this accelerating PPP financial strategy will be a huge win for California, as our agriculture, water and lifestyles depend on clean air, clean water and higher resiliency.

With that said, can you share your perceptions of what the obstacles are of having buy-in by policymakers, at least to the state of California, to get to goal here?

What we've experienced so far has been a very strong, but understandable, resistance by community members and labor interests when it comes to using tax incentives to encourage development in low-income communities. However, investment in clean energy and decarbonization projects, paired with predevelopment support and workforce training encourages community-based economic development and resilience. Almost all of the risk and resistance by communities can be mitigated by communicating the positive outcomes that green infrastructure investment has. Easing some of those regulatory obstacles wouldn’t hurt either. Or providing projects with predevelopment support to relieve some of the associated costs and time would help attract and encourage the kinds of projects and capital investors that can have a real impact on communities, rather than displacing them.

We’ve always had a big-tent stakeholder group mentality, whether it's community members, neighbors, the finance community, the developer community, the CEOs of these clean energy companies; all stakeholders need to be included and understand what the potential benefits are and what work they have to do to prepare the place. That’s how you get community buy-in and support for investments that can begin to have a global impact.  Government at all levels in California have the potential to lead by deciding what clean economy projects they want, where they want them and pre-developing so that labor, community groups and private capital can take them over the line.

Jon, share with our readers the focus of your work today. What are you up to?

Jon Bonanno: I have the privilege to serve as the CXO of the New Energy Nexus—formerly the California Clean Energy Fund—a 15-year-old 501c3 nonprofit that has had a mandate over the years of supporting diverse entrepreneurs to solve the multi-faceted climate crisis in an equitable manner. We have mobilized approximately $1.3 billion for this purpose, and we have a goal to have a positive impact on 100,000 entrepreneurs worldwide by 2030.  My CXO role is program and geography cross cutting.  My days include improving our funded portfolio companies, innovating around finance and building capacity on our not-for-profit balance sheet.

And briefly, what is the strategy for accomplishing that mission?

Our organization has been designed by entrepreneurs who know where the pitfalls are on the Road Of Success. So our programs are built in an ascending methodology – from early to later stage, or from moment of inspiration to exit.  One of our key tools in supporting our clean economy entrepreneurs has been developing and administering grant programs for governments, foundations, family offices and high-net-worth individuals. Beginning in 2004, after PG&E’s first bankruptcy settlement, the CPUC created the California Clean Energy Fund—a 501vc™—which was a fun name to use for a while. We went out and pursued a fund-to-fund investment strategy with Dan Adler at the helm, and he did a fantastic job. Flash forward 11 years to 2015, the money had really run out and there was a constriction on the working capital.

We recognized that the organization had to pivot and start working diligently on fee-for-service programming. So we've created an ascending path of support mechanisms, which intervene, educate and assist entrepreneurs throughout their pathway. You’ll also notice that—as we're moving through the program portfolio—we have an ascending progression.

Our first relatively small program is something called the Explorer in Residence (XIR) program, which through a competitive process provides between four and six winners $10,000 to $15,000/winner non-dilutive grants per year. They're typically sponsored by community foundations and usually directly impact local communities focused on bringing people of color, women, recent immigrants, refugees into the clean energy entrepreneurship fold.

Secondly, we administer the Seed Program (CalSEED) Concept Awards, which are funded by the CEC. We grant approximately twenty-five $150,000/winner non-dilutive grants per year through CalSEED. It's a growing program and have had incredible results.  We have 71 companies in our funded portfolio, some of which are run by women, people of color, and regions that are traditionally overlooked. We’re really looking at funding a variety of solutions as well—from lithium mining and air cooling technology to transportation electrification and business model innovation around solar. It really covers the gambit.

Following Concept, we have the Prototype Program— a $450,000 non-dilutive grant funded by the CEC that we award between 4 and 6 of per year.  Prototype is followed by our CalTestBed program, which is a voucher system for clean energy entrepreneurs to go to world-class laboratories in California to test their prototypes.  Following TestBed, we have the Challenge Programs, which are corporate-sponsored challenge programs focused typically around very specific themes. We've just completed the Battery Challenge, which was sponsored by LG Chem. It was an incredibly successful program, and we plan to do more specifically-themed challenges sponsored by corporations going forward.

The final leg of the stool is EZOZ.org, our digital platform for facilitating of qualified opportunities zone investment in clean energy infrastructure projects. The platform has launched in beta, and we have already formed several qualified opportunity zone funds (“QOFs”)—for capital gains investors to invest in clean energy projects and businesses in low income America’s Opportunity Zones.

There’s tremendous opportunity to leverage the funding of the kind we administer, with private capital sources to fund clean infrastructure development at the scale and pace necessary to move the dial on climate change. With targeted predevelopment financial support from government, the clean economy accelerate the transition in a way that encourages equitable and community-led impact investment in low-income areas across the state.

You have an entrepreneurial background and experience, and it's clear in your comments and your mission here that that's a part of what gives you hope about the future. Are the California public policymakers, in your experience, equally comfortable with and attuned to the private sector’s role in this program and goal of getting a pipeline created?

The New Energy Nexus not-for-profit programs and outlook have been designed by entrepreneurs. We run programs that were designed by entrepreneurs, for entrepreneurs. We have worked very successfully with municipal partners on a variety of programs. Do I feel that municipal groups are working at the pace of a startup? In very infrequent cases, yes. There are some cities that are working incredibly hard, are very focused, and have the mindset of a startup. Then there are other government bodies that are taking a little bit too much time, honestly. I hope that all actors with authority to use public funds use the ongoing climate crisis events as a Clarion Call to identify the clean energy assets they want, fund pre-development activities and “set the table” for other stakeholders to finish the race.

I live in Sonoma County, and the climate crisis is here with ghastly wild fire smoke closing schools, stores and public facilities for many days. The rhetoric in this conversation for so many years has been that “climate change is coming”. When we read the IPCC reports or Jeremy Grantham, it’s about an apocalypse that's coming at some point in the future, but that’s no longer true. The climate crisis is now, and we're seeing just the very early tip of the long, uphill grind. We have to prepare ourselves by being more proactive in government by deploying resources of all sorts, whether it's entitlement acceleration and streamlining, or actual cash grants for things like technical assistance, workforce training or predevelopment support for these particular focus projects.

All of this is required, but my concern is the sense of urgency. We are maybe on Level 3 and we need to be a Level 11. As someone who has worked in the engine room of so many startups—some successful and some not—one is always at Level 11 in startup land. We put our hand out to all of our municipal partners, and encourage them to up the sense of urgency. We are working in partnership now, and we look forward to expanding and deepening those relationships. Bringing more parties into the conversation, and bringing more resources into the solution set are critical.

"There’s tremendous opportunity to leverage the funding of the kind we administer, with private capital sources to fund clean infrastructure development at the scale and pace necessary to move the dial on climate change." —Jon Bonanno

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