Jigar Shah, CEO of the Carbon War Room, and founder of SunEdison has his finger on the pulse of clean energy and solar financing. His insight - from an excellent CleanTechnica article - is worth quoting at length. It's a great description of why financial powers are finally shifting allegiance toward solar and other clean energies -  and the secret Warren Buffet already knows.

Here goes:

Since 2000, commercial electricity prices have gone up by almost 5% per year.  Even after the crash in wholesale prices from the financial crisis of 2008, most electricity customers are still paying much higher prices than the historic 0.6% annual rate increases in the 1980s and 90s.  The reason for this is that all of the infrastructure in the United States is “old”.  Most of the coal plants are over 40 years old and realistically cannot be run for more than another 10 to 20 years.  Most of the substations in the United States were built before everyone decided to install air conditioning.  When new natural gas plants are built, it isn’t the gas plant that is so expensive, it is the changes in the grid required to accept this new concentrated electricity source that makes up the bulk of the expenses.

With installed solar prices approaching the $2/Wdc mark for commercial rooftop systems, it is now more cost effective than retail electricity prices for over 20% of all US electricity covering 200 utilities in 29 states.  The persistence and the excitement fueled by the VC community caused over 5,000 contractors to invest their hard earned money to make solar in the local community a reality.  The final step in the solar transformation is about finance, not about technology. 

In 2008, the solar industry was on the cusp of finally creating ways for common Americans to invest in solar power, to put their money where the poll numbers already suggest their heart is.  This last step was postponed by the financial crisis and is finally ready to be started again.  There are ten individual initiatives that are being led by entrepreneurs, well-known private equity managers, and large well capitalized companies all headed for the same objective, bring low risk solar assets to the public markets so that pension funds and individual investors can benefit from what Warren Buffet already knows — renewable energy projects have a higher yield and are a safer investment than corporate bonds.

In the oil, electricity, and transportation industries we have annual capital expenditures into infrastructure (not consumer products) of almost $2 Trillion per year.  The combined revenues of HP, IBM, Cisco and others that sell hardware for information infrastructure is almost 10 times less than that.  Shifting the investment into our core energy infrastructure is a multi-decade struggle that has resulted in 2010 with more money going into new renewables of $187B  while only $157B went in to new fossil fuel and nuclear generation. 

Given that investment banks, law firms, and jobs care about new stuff being built all shifted their loyalties to the renewables side of the ledger.  In 2011, Bloomberg New Energy Finance said that since 2000 we have invested over $1 Trillion in clean energy broadly — $243B in 2010 alone.  This means that with current growth rates, our next Trillion will take only 4 years and by 2020 we will probably be at $1 Trillion annually — over 50% of the almost $2 Trillion needed by the whole energy industry.

Financial innovation is about building trust.  Investors need to believe that these technologies have almost zero technology risk or 100,000 hours of field testing.  They need to know that the financial products are structured in a way that clearly takes into account all of the risks.  While these steps are easier for clean energy, they are not trivial.  The efforts of the VCs and the US Government mean that we now have a set of technologies that meet this profile and have been accepted by the grand masters of finance such that they can reach $1 Trillion of annual investment by 2020.  Like the oil and gas industry, more innovation will always be possible, but meeting the final hurdle of acceptance by the finance industry is something that the oil and gas industry knows how to do.  And now so do we.

ps. This may be why Buffett just announced that his MidAmerican Energy subsidiary is forming a Renewables unit to encompass some of his new major solar and wind farm acquisitions.