January 23rd, 2025 — Renewable energy deployment has rapidly increased in the United States in recent years, with solar deployments growing 51% from 2022 to 2023 and battery storage capacity expected to have doubled in 2024. This growth has been primarily driven by decreases in the levelized cost of energy (LCOE), with renewable generation and storage unit economics at parity with, or below, conventional generation. Tailwinds from the Inflation Reduction Act have increased the instances where renewables have a unit economic advantage over conventional generation sources, and planned wind and solar capacity has doubled since 2022. As a result of these underlying trends, we expect that up to $200B will be invested into renewable energy projects annually in the US through 2035.
The problem
The rapid growth of renewable energy deployment has exacerbated an existing bottleneck: financing these transactions. At an 8% cost of capital, financing comprises 50% of renewable LCOE.
Modeling and structuring to achieve the optimal capital structure for these renewable energy projects is bespoke, time-consuming, expensive, and requires highly specialized project finance professionals who are increasingly difficult to find.
An especially challenging component that requires expertise is modeling tax equity and hybrid structures that achieve returns through tax credits and deprecation.
As a result, transaction complexity and workforce constraints prevent new entrants into the tax equity and transferability markets, leaving a market dominated by a limited set of investors that demand a higher cost of capital.
The solution
CapeZero offers a highly intuitive, accessible, and accurate modeling and structuring software solution that enables stakeholders in the renewable energy finance ecosystem to dramatically increase deal analysis and transaction velocity.
The platform relieves a critical project finance skill gap, reduces transaction costs, and aims to lower the cost of capital for project developers and owners.
As we enter the Terawatt Era of renewable energy deployment, CapeZero’s platform is poised to unlock the growth of the renewable energy industry.
Renewable energy deployment, project finance, and tax equity are accelerating rapidly to meet market demand
Given unit economic advantages, solar, wind, and batteries constitute over 75% of total generation capacity brought online in the US each year since 2021.
Grid planners in the US have almost doubled their projections for load growth over the next 5 years, primarily driven by manufacturing onshoring, data center expansion, and electrification. Renewable generation and storage assets will be the dominant technologies utilized to meet this load growth, and currently represent 95% of US interconnection queues.
Investments in renewable generation and storage are expected to grow from roughly $60B annually to $150B annually in 2030. Tax equity and hybrid financing structures will remain a key piece of the capital stack as Investment Tax Credits (ITC) and Production Tax Credits (PTC) have the potential to grow to $50B or more annually.
While there is uncertainty about the Trump administration’s approach to the IRA, the expanded technology-neutral ITC and PTC support technology types like nuclear that are popular among Republicans. The IRA has spurred significant clean energy investments, particularly in Republican-led districts, and some GOP lawmakers acknowledge the benefits of the IRA's provisions and may resist efforts to dismantle them entirely. Through all of this, developers, investors, and advisors will need to analyze and model scenarios with increased complexity in a rapidly changing market.
The status quo is too slow and expensive to support this rapid growth, and this will be further exacerbated by labor gaps
Today’s approach to renewable energy financial modeling and structuring is manual, which significantly impedes developers’ ability to scale their business processes. They routinely spend 2.5-5%+ of hundreds of millions of dollars of project costs on overhead costs and fees.
The growth in renewable energy deployment has created a bottleneck in the skilled project finance professionals who can accurately and efficiently model and structure transactions.
Because these financial transactions are so complex, developers generally only have capacity to approach a limited number of potential investors, and new investors are disincentivized from learning about and entering the market. These dynamics reduce liquidity and increase the cost of capital for capital-intensive projects that are dependent on financing sources to achieve the returns needed to build the project.
CapeZero unlocks renewable energy project finance at scale by increasing transaction velocity and reducing transaction and capital costs
CapeZero’s initial software product focuses on enabling accurate and efficient modeling and structuring at the earliest project development stages. This includes all deal structures and project assumptions common to the renewable energy industry, such as tax equity flips, construction and term debt sizing, sale-leasebacks, transferability and hybrid structures, tax credit elections and adders, and complete capex and pro forma buildup of expected capital costs and cash flows.
From there, CapeZero is set to expand into products that leverage its modeling capability to help increase accessibility and navigation for clean energy finance transactions through the full deal life cycle.
By connecting value-enhancing functions for project finance into a single easy-to-use platform that standardizes and streamlines the most difficult and labor-intensive components, CapeZero delivers value across the project finance ecosystem.
Project finance teams at renewable energy companies can move 50-75% faster on deals, engage more effectively with stakeholders regardless of tax equity subject matter expertise, and onboard and de-risk hard-to-find new talent on their own teams.
With modeling and deal-making products on one platform, CapeZero’s subscription service will enable the average developer to save 15x on its total cost budget for development, sourcing, closing, and tracking projects.
Powerhouse Ventures is proud to lead CapeZero’s $2.6M seed round, with additional participation from Climactic, Avesta Fund, Virta Ventures, and Stepchange. We look forward to working with Co-Founder & CEO Manish Hebbar, Co-Founder & CTO Sumit Chachra, and the entire CapeZero team to unlock renewable energy finance at scale.
Special thanks to Gabriel VanLoozen and Marie Thompson.
To read more about our work at Powerhouse and Powerhouse Ventures, visit our Insights page.