Renewable Energy Finance

The following sections are included:

• About the Editor
• About the Contributors
• Contents

Following a steep fall in oil price in the early 1980s, the renewable energy industry was nearly decimated. Significant investments by large oil companies such as Exxon in solar photovoltaics (PV) were sold off or abandoned, and interest in the sector stagnated for nearly two decades. At the end of the last century, only two countries, Japan and the United States, were producers of solar PV panels and the total investment in the renewable energy sector as a whole bordered on trivial…

The following sections are included:

• Introduction
• The Current State of the Energy Sector
• Costs and Prices
• Forecasting the Future
• References

The following sections are included:

• Introduction
• How the Physical Nature of Electricity Shapes its Markets
• How Governments Support Renewable Power
• How Renewable Power Affects the Electricity Market
• Conclusions
• References

The following sections are included:

• Introduction
• Barriers to Renewable Energy Investment
• The Currency (or Foreign Exchange) Risk
• The Counterparty Risk
• Conclusions
• Acknowledgements
• References

The following sections are included:

• Introduction
• The Cost of Capital in Valuation Methods and its Determinants
• Cost of Capital Levels for Three Different Investor Groups
• Comparison of Investment Profiles of Renewable and Fossil Energy Projects
• DCF and Cost-Based Valuation, and How Capital Costs Impact the Outcome
• Conclusion: Renewable Energy Investment Decisions as a Function of Cost of Capital
• References

Social and economic infrastructure are integral to maintaining a society’s quality of life. Infrastructure remains one of the few topics for which unanimous political support seems plausible, and every year, approximately $2.7 trillion are spent worldwide on infrastructure projects such as ports and bridges (Authers, 2015). Yet this seemingly enormous sum masks an infrastructure expenditure gap (i.e., the difference between what is spent and what should be spent) of at least $1 trillion per year — a number which may grow in the coming years. This is due to ongoing contributors such as exploding population and economic growth in emerging markets, historical underinvestment in infrastructure, and misalignment of the interests and needs of the private sector, the public sector, and civil society in infrastructure-related decisions (Authers, 2015)…

Incorporating carbon price risk in valuation and investment decisions poses significant challenges for power sector investors. To the extent that carbon emissions are a cost of production for fossil fuel generators, capital markets theory would suggest that a rising price for any factor of production would lead investors to revise their expectations of future profits, leading to lower company valuations (Veith, 2009). Thus, in principle, carbon emissions create a contingent liability for carbon-intense generators and the valuation implication of this depends upon the extent to which these liabilities can be passed on to consumers. This chapter explores how carbon pricing changes the competitive dynamics of fossil fuel and renewable energy technologies in European power markets.

The OECD estimates that $6.9 trillion a year needs to be spent globally until 2035 in order to maintain global temperature increase within a 2℃ range, of which 60–70% will be in emerging economies. The energy sector alone represents a third of this investment need, or circa $1.5 trillion in these countries (of which 40% is in energy generation). Against this, investment in clean energy generation has amounted to an average of $160 billion in emerging countries in the past couple of years. This suggest a funding shortfall of about $450 billion a year, equivalent to three times current levels of investment…

The following sections are included:

• Introduction
• The Roles of “Green” State Investment Banks in RE Finance in High Income Countries
• The Roles of Multilateral Development Banks in RE Finance in Low- and Middle-Income Countries
• Discussion and Conclusion
• References

The following sections are included:

• Introduction
• Project Finance and the Role of Commercial Banks in the Renewable Energy Industry
• The Supply of Credit in the Form of Non-recourse Project Financing
• The Sources of Credit Risk in Renewable Energy Financing
• Renewable Energy Project Financing: Duration, Pricing and the Impact of the Credit Cycle
• The Impact of the Long-Term Nature of Project Finance in Commercial Banks
• The Future Role of Commercial Banks in Renewable Energy Financing
• References

The following sections are included:

• An Introduction to Private Equity
• The Private Equity Approach to Investing in Clean Energy
• Case Study: Spanish Solar
• The Future of the Industry
• Case Study: Private Equity in Distress in Spain
• References

The general concerns about renewable energy finance generally fall into two broad categories: first, that there is not enough investment available to fund the renewable energy required under a transition to a low carbon economy; and second, that investors demand too high a return, making the cost of renewable energy too expensive…

The following sections are included:

• Origin of the Idea
• Financial Structure of the Leasing Model
• Advantages of Solar Leasing
• Implementation Hurdles
• Sector Growth in the US
• Solar Leasing Beyond the US
• Securitization of Solar Leases
• What’s Ahead?
• References

In 2012 when a wind turbine started spinning in the historic village of St. Briavels on the border of England and Wales, it was more than just another small step toward a clean energy system in the UK. The turbine lays claim to be the first renewable energy project in the world to be financed through crowdfunding — the 21st century phenomenon that involves large numbers of individuals coming together via the internet to directly raise money for projects or ventures of their choosing. A total of £1.4 m was collectively invested by hundreds of people who now stand to receive annual financial returns of 6–8% over a period of 20 years as electricity is generated. The achievement signified the evolution of crowdfunding from a niche based on donations and rewards to an investment mechanism capable of delivering new sources of private finance to fund the energy infrastructure of the 21st century…

The following section is included:

• Index