Renewable energy financing: Opportunities and challenges for investors

Abstract

Financing of renewable energy has therefore become a major factor of investment given the change of focus from fossil-based energy to a cleaner energy. This paper aims at identifying and analyzing the potential and constraints of Renewable Energy financing for investors, with specific emphasis on major factors as factors influencing investment decisions, role the government policies, and available financial instruments for financing Renewable Energy projects. The collection of data was done through both primary and secondary sources which include questionnaires and structured interviews on 150 Respondents drawn from both developed and emerging markets comprising of investors and project managers. The research also highlighted the role of incentives including feed-in tariffs, renewable energy certificates to attract investments and that AI and big data made such projects more bankable by increasing operational efficiencies reducing overall costs. Still, the following challenges exist; costs are high especially for initial investments, M&As have longer return on investments and there are a lot of uncertainties with regards to the policies at the market especially in the emergent market. This paper also finds that renewables are a rich source of business opportunities, but these challenges in the area of finance and policy are critical to overcome for the sector to grow. In order for more players to participate in the transition to renewables, risks must be managed and investor awareness need to be raised along with the introduction of new mechanisms like green bonds and public private partnership.

Keywords: Renewable energy financing, Government incentives, Investment risks, Technological advancements, Artificial intelligence, Big data, Green bonds, Policy uncertainties, Investor education, Emerging markets