Who invests in renewable electricity production? Empirical evidence and suggestions for further research

Abstract

Tranforming energy systems to fulfill the needs of a low-carbon economy requires large investments in renewable electricity production (RES-E). Recent literature underlines the need to take a closer look at the composition of the RES-E investor group in order to understand the motives and investment processes of different types of investors. However, existing energy policies generally consider RES-E investments made on a regional or national level, and target investors who evaluate their RES-E investments according to least-cost high-profit criteria. We present empirical evidence to show that RES-E investments are made by a heterogeneous group of investors, that a variety of investors exist and that their formation varies among the different types of renewable sources. This has direct implications for our understanding of the investment process in RES-E and for the study of motives and driving forces of RES-E investors. We introduce a multi-dimensional framework for analyzing differences between categories of investors, which not only considers to the standard economic dimension which is predominant in the contemporary energy literature, but also considers the entrepreneurship, innovation-adoption and institutional dimensions. The framework emphasizes the influence of four main investor-related factors on the investment process which should be studied in future research: motives, background, resources and personal characteristics.

Technological innovation systems in contexts: Conceptualizing contextual structures and interaction dynamics

“…For example, buyers of renewable energy technologies are often diversifying into electricity production from other industries and sectors, e.g. pulp and paper, food, agriculture, forestry, real estate and manufacturing (Bergek et al, 2013). Because of such structural couplings, sectoral dynamics in adjoining sectors can influence the actions of both suppliers and users in the focal TIS and, thus, its functional dynamics.…”

A diverse and resilient financial system for investments in the energy transition

“…When it comes to early-stage finance, debt instruments are often simply not available due to lack of collateral and track record [39]. Innovative ventures often add market and technical uncertainty to the regulatory uncertainty.…”

“…However, due to the lack of global mechanisms, second-best instruments are required. To accelerate the diffusion of clean energy and associated investments policy makers first could deploy technology-push mechanisms such as direct R&D investments, subsidies and tax-credits that target the early stages of the innovation cycle or early stage VC/PE [36,37,39]. Direct investments and co-funding also mobilise private early-stage finance [57,58].…”

“…Moreover, the only countries in the world that can boast a significant VC and private equity (PE) market are the US, UK and Israel, where many complementary institutions support these sectors [40][41][42]. In particular Europe, with its highly concentrated and regulated, bank-dominated financial system, channels only a very small and declining fraction of its savings through these PE intermediation channels (to clean energy) [39]. While PE firms get their funds from institutional investors, the vast bulk of Europe's substantial savings surplus, is invested directly by institutional investors like pension funds, or more precisely, their asset managers and banks.…”

“…Fiscal and financial incentives such as grants and subsidies [37,39,61] prove less effective than feed-in tariffs [62][63][64][65][66] that also target smaller distributed capacity investments [67]. To address network externalities and reduce private risks regarding complementary assets, public investments are suggested [68,69].…”