It is of widespread opinion that, in addition to technological challenges, suitable financing for renewable energy projects is of one the biggest challenges to a the international breakthrough of the renewable energy sector.
Numerous international studies speak of massive funding needs for energy efficiency and renewable energy projects, and given the industry’s financial environment, such as long repayment periods, illiquid assets and high regulatory dependencies, it is crucial to maximize interaction between investors and other stakeholders and create appropriate financing models which can be add to the market.
Global investment in the energy sector has fallen in recent years. In 2015, although drown compared to the previous year, energy investments still amounted to 1,8 trillion USD. The largest chunk of these investments continue to be investments in the oil and gas sector. However, the share of renewable energies is growing strongly, although the investment volume in USD has remained close to constant since 2011.
In addition, installed capacity of renewable energies has continued to increase as the costs of the technologies have dropped significantly. And although, the overall amount investment in biofuels and renewable heat sources is still very low, wind, photovoltaic and hydropower investments are taking off. In 2015 amounting to approximately 290 billion USD. (IEA, 2016)
According to a study by Senn and Ganguly (2017), a doubling of the share of renewable energies as part of total world energy consumption over the next 15 years, is technically as well as economically possible. But such a shift in the industry would require an immediate need for action.
Annual global investment in renewable energy across all sectors is projected to exceed $ 500 billion by 2020 but a further increase to $ 900 billion would be needed annually from 2020 to 2030, to double the share of renewables as part of the global energy mix.
Because renewable energy is a capital and technology-intensive industry, investors are confronted with many different uncertainties. High risks (technical as well as economic) make investments in renewable energy unattractive, which can increase the cost of capital for project implementers.
It is therefore necessary to create incentives for the market and to encourage investment.
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