How do policies mobilize private finance for renewable energy?—A systematic review with an investor perspective

Friedemann Polzin*, Florian Egli, Bjarne Steffen, Tobias S. Schmidt

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

With the urgency of climate change, and billions spent globally on renewable energy (RE) support policies, it is crucial to understand which policies are effective. Substantial scholarly research on RE deployment policies has been carried out over the last two decades, resulting in inconclusive findings regarding the effectiveness of mobilizing private finance. Here, we take a novel perspective and review 96 empirical studies concerning the impact of policies on two key investor decision metrics: investment risk and investment return. Only if both metrics correspond to the investors’ expectations are they willing to engage in RE projects. First, our rigorous literature review shows that effective policies address risk and return simultaneously. Second, we find that generic instrument design features, such as credibility and predictability (continuous evaluation and monitoring), considerably impact investment risk. A more focused analysis of the specific design elements of feed-in tariffs, auctions and renewable portfolio standards reveals that these instruments are most effective when they are designed in such a way that they reduce RE project risk while increasing return. We distil important implications for policymakers who aim to foster renewable energy and clean technologies more broadly.

Original languageEnglish
Pages (from-to)1249-1268
Number of pages20
JournalApplied Energy
Volume236
DOIs
Publication statusPublished - 15 Feb 2019

Funding

This research was conducted as part of the EU’s Horizon 2020 research and innovation programme project INNOPATHS under grant agreement No. 730403 . As such, it was partly supported by the Swiss State Secretariat for Education, Research and Innovation (SERI) under contract number 16.0222 . The opinions expressed and arguments employed herein do not necessarily reflect the official views of the Swiss Government. The author team is grateful for comments on early versions of this paper, presented at the INNOPATHS finance stakeholder workshop in Utrecht (September 2017), at the project meeting in Florence (February 2018) and at the 6th International Symposium on Environment and Energy Finance Issues (ISEFI) in Paris (May 2018). Appendix A

Keywords

  • Auctions
  • Feed-in tariff
  • Investment
  • Policy design
  • Renewable energy
  • Renewable portfolio standards
  • Risk-return

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