Barriers to investment in utility-scale variable renewable electricity (VRE) generation projects

Finance Unchained: The Political Economy of Unsustainability

“…An additional set of barriers appears at the point when developers apply for funding to finance the buildout. Most funding comes from banks, which may be put off by renewables' relatively brief track record and anticipation, justified or not, that returns will be low [72] p. 744; the herd behavior mentioned earlier in the paper comes into play here. Venture capitalists (VCs) have also been expected to play a major role in financing, but the extent of their actual participation has been disappointing; as Mazzucatto points out, "the development of many clean technologies requires long-term financial commitments of a kind that VCs are not willing or able to undertake" [66] p.p.…”

“…Hu et al [72] p. 731 estimate that a minimum global investment in renewable energy of about $4.5 trillion will be needed by 2040 to limit global average temperature increase to the official Paris target of 2 • C (obviously, this amount would have to increase substantially to hit the lower, 'safer' target of 1.5 • C.), and strategies to mobilize the private sector are the subject of much discussion in international organizations such as the UN and IMF. The abundant credit noted above is not going into investments in renewables in sufficient quantities; it is rather going to household debt, government deficits, and asset bubbles [70]-and to the tried-and-true fossil fuel sector.…”

“…Renewable energy investments are relatively risky, even with government funding some of the initial R & D. As Hu et al, point out, renewables face a competitive disadvantage from the outset because fossil fuel generators are not forced to internalize their costs [72] p. 737 thanks to competition-state resistance to regulation or putting a price on carbon emissions. But that is just the beginning of the many barriers they identify that face prospective renewable project developers: "In traditional finance theory, the assumption of perfect information and full-rationality implies that investment decision-making should be informed by the statistically measurable risk .…”

“…(To illustrate policy risk with a specific example: As this paper was being written, the U.S. Congress failed to renew the investment tax credit for the solar industry.) What the authors call "path dependence" is also important: Because nearly all of the electricity grid was designed for fossil fuel generation, it may not be flexible enough to accommodate variable renewable sources or have a source of backup power [72] p.p. 730-734.…”

A Scoping Review of Barriers to Investment in Climate Change Solutions

“…The barriers are often identified as those specific to a particular technology deployment, country, or within the context of an economy that has a path dependency associated with fossil fuels. Indeed, if all economic regulation and the future strategy of economic growth was aligned with finding a solution to climate change then the majority of the barriers would not exist [53][54][55]. Of course, as investment into climate change solutions increases, then new risks and technology 'lock-in' may occur, depending on how specific policy is implemented, which should be properly understood and measured [56,57].…”