Finance in global transition scenarios: Mapping investments by technology into finance needs by source

Friedemann Polzin*, Mark Sanders, Alexandra Serebriakova

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Numerous studies have presented scenarios regarding energy transition, including the computation of investment costs in various models. Although these studies project detailed investment pathways for different technologies, they do not distinguish between different sources of and types of funding. They tell us what the transition will cost, but not how it will have to be financed. In this paper, we develop a methodology according to which an appropriate financing mix can be calculated from these investment projections based on technology-related assumptions in scenarios. We differentiate between debt and equity as well as between the following sources: public/private Research, Development and Demonstration (RD&D), small-distributed financing, venture capital (equity), public markets (equity), and asset finance (debt and equity provided by institutional investors). We show that major commitments to wind and solar energy need to come from institutional investors in the form of asset finance. In addition, to achieve the transition to a decarbonized power system, government and private investors need to continue investing and extend their engagement in funding research, demonstration, and early deployment. Finally, we present a number of policy options targeting the different sources of finance.
Original languageEnglish
Article number105281
Number of pages9
JournalEnergy Economics
Volume99
DOIs
Publication statusPublished - Jul 2021

Keywords

  • Clean energy investments
  • Mitigation pathways
  • Sources of finance
  • Financial system
  • MOBILIZING PRIVATE FINANCE
  • RENEWABLE ENERGY
  • POLICY
  • SYSTEM
  • RATES
  • INNOVATION
  • BARRIERS
  • SECTOR
  • COST

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