Although spending on oil, gas, and coal for the first time may reach US$ 3 trillion in 2024, but economic considerations are putting off some jobs.
In its World Energy Investment 2024 report, the Paris-based International Energy Agency stated that” some types of investment are being hampered by higher borrowing costs since the age of cheap loans ends.”
According to Samuel Sun, chairman of the Asia Development and Investment Bank, a local plan banks with branches in Hong Kong and Malaysia, lease financing, a staple of the travel equipment market, may enable funding for projects that may not have access to conventional funding.
In order to commit$ 140 billion in rent funding for alternative energy over the next five years, ADIB and DeepGreenX, an AI provider that provides project management and graphite trading services, recently teamed up.
The ADIB ally to DeepGreenX does create critical mass in the market for efficient energy equipment, as leasing made it possible for the current auto and aircraft industries.
Because products leases can be reorganized into asset-backed stocks and resold to investors, ADIB’s$ 140 billion commitment may allow for many larger equipment sales. The US market for car leases is$ 30 billion, whereas the US market for airplane leases is probably only half that size.
Large state subsidies have n’t been effective in halting renewable energy projects in Europe and the rest of the world, mostly because technology is expensive upfront. Instead of paying upfront the entire investment amount, lease funding allows project operators to pay for equipment use outside of operating cash flow.
The international level of project financing may be significantly affected by the ADIB-DeepGreenX approach. Coherent Market Insights, an India-based market intelligence and consulting firm, wrote earlier this year,” The global solar lease , service , market size is estimated to be valued at ,$ 14.84 billion in 2023 , and is expected to reach$ 49.26 billion by 2030″. The ADIB program’s size is significantly greater than the company’s estimates for the contract business.
A big business can be transformed by the right kind of finance. Before 1983, home loan financing in the US was the province of more than 11, 000 prudence organizations, constrained by their local conditions.
Cash-rich savings in the Northeast of the US was n’t contribute to cash-strapped consumers in the Sunbelt. The US experienced a housing bubble as a result of mortgage security, which mobilized benefits.
Contract borrowing has specific advantages for green energy technology, according to Samuel Sun, a task finance veteran who serves as ADIB’s president.
“60 to 70 % of the cost of a job is in tools”, Sun said in an exam. The buyer and the job owner are under a lot of pressure due to the high cost of the equipment. To solve that kind of issue, we are attempting to apply contract financing. That’s the upcoming model of clean power company. The best way to use low-cost cash to support clean energy projects is through it. In the automotive and aerospace industries, there are effective versions.
” We merely signed an agreement with Saudi Arabia”, ADIB’s Sun explained. ” They will buy 100, 000 Chinese cars, mainly EVs, for government and public use. The property will stay on the automakers ‘ books because they will lease them rather than purchase them. We use Central Bank Digital Currency to buy the trucks, transform the property, spend the producers, and send the cars to Saudi Arabia. The five-year license is paid for monthly to us.
The car owner benefits because the company retains control over the sale value risk. Due to rapid improvements in technology, the sale price of a five-year-old EV is extremely small.
Because of improvements in EV systems, which result in higher profits for the car manufacturer, the auto maker has no problem owning that chance. The automobile manufacturer increases sales by lowering the risk of the automobile person buying it again.
According to ADIB’s Sun, modern technology does speed up the financing of leased assets and boost investment turnover. Securitized assets can be tokenized with Real World Asset ( RWA ) technology. ADC anticipates that Central Bank Digital Currencies ( CBDCs ) will allow for asset-backed securities trading, increasing investor interest and liquidity.  ,
With a product offering in Hong Kong, Sun anticipates that investment products based on real-world assets will be tradable as early as the first quarter of 2025.
Sun noted that the leasing model can significantly lower financing costs, adding that” we can also use this system for green energy equipment.” The effective financing rate for car leases ranges from 16 % to 18 %. Effective leasing interest can be lowered to 5 % using our tokenized RWA model. Investors who invest in our lease-based token will receive 10 % of the investment.
Traditional cryptocurrencies, such as Bitcoin, do n’t have a fixed rate of return. Bitcoin’s owners hope that its scarcity will cause its price to rise. Tokenized RWAs, though, are based on real-world assets that generate a rate of return, like equipment leases.
Assets in CBDCs with an inherent rate of return may compete favorably with Bitcoin and other well-known crypto vehicles as distributed ledger technology makes RWA investing accessible to a large public.
ADIB has taken a 36 % stake in Deep Green X at a post-investment valuation of$ 58 billion. DeepGreenX provides several AI-based services for green energy, including an AI platform for engineering, procurement and construction ( EPC ) to optimize project efficiency. Additionally, DeepGreenX will offer AI-based technology to create securitized assets based on leases for green energy and other real-world assets.
According to a company release,” DeepGreenX has established itself as a leader in various sectors, securing European projects on national virtual grid construction, photovoltaic power plants, grid energy storage centers, wind and microgrid equipment manufacturing, computing centers, and micro-nuclear power services, as well as US-based stored energy battery production”.
In a company release, Barclay Knapp, CEO of DeepGreenX, stated that” we anticipate this initiative to significantly advance the global expansion of green energy industries, breaking with the current system of limited supply of cross-border capital and standalone profitable business models.” Our new fund, in our opinion, will transform the alternative energy industry in a similar way to how lease financing transformed the auto and aerospace industries. We are collaborating with ADIB to create a global capital and data-driven profitability platform with unparalleled power and scale that will be able to overcome these difficult issues.
Knapp, a partner at DeepGreenX, began his career by creating the first cellular network in the US. Conventional wisdom predicted that regular people would be upset about the cost of the first cell phones because they were prohibitively expensive.
” Leasing removes the entry barrier”, CEO Knapp said in an interview. ” The minute we could finance phones, it took off, people who could n’t shell out$ 1, 500 for a phone would pay$ 150 a month to lease one”. He anticipates the same transformative effect from green energy equipment lease financing.
DeepGreenX’s project management software is one of several AI applications. The most crucial task may be using AI to calculate carbon credit.
” It’s the Wild West out there in carbon measurement. In a tense environment with a fragmented market for carbon credit, it is not just that you have no laws, but that you have laws everywhere, Knapp Said. ” We can do precise measurement and verification. And once verified, using AI and blockchain technology to digitize that and turn it into a financial product is simple. That makes carbon credits more valuable and clears the confusion.
Follow David P Goldman on X at @davidpgoldman