Financing renewable energy: Who is financing what and why it matters

Successful financing of innovation in renewable energy (RE) requires a better understanding of the relationship between different types of finance and their willingness to invest in RE. We study the ‘direction’ of innovation that financial actors create. Focusing on the deployment phase of innovation, we use Bloomberg New Energy Finance (BNEF) data to construct a global dataset of RE asset finance flows from 2004 to 2014. We analyze the asset portfolios of different RE technologies financed by different financial actors according to their size, skew and level of risk. We use entropy-based indices to measure skew, and construct a heuristic index of risk that varies with the technology, time, and country of investment to measure risk. We start by comparing the behavior of private and public types of finance and then disaggregate further along 11 different financial actors (e.g. private banks, public banks, and utilities) and 11 types of RE technologies that are invested in (e.g. different kinds of power generation from solar radiation, wind or biomass). Financial actors vary considerably in the composition of their investment portfolio, creating directions towards particular technologies. Public financial actors invest in portfolios with higher risk technologies, also creating a direction; they also increased their share in total investment dramatically over time. We use these preliminary results to formulate new research questions about how finance affects the directionality of innovation, and the implications for RE policies

The pace of governed energy transitions: agency, international dynamics and the global Paris agreement accelerating decarbonisation processes?

The recent debate on the temporal dynamics of energy transitions is crucial since one of the main reasons for embarking on transitions away from fossil fuels is tackling climate change. Long-drawn out transitions, taking decades or even centuries as we have seen historically, are unlikely to help achieve climate change mitigation targets. Therefore, the pace of energy transitions and whether they can be sped up is a key academic and policy question. Our argument is that while history is important in order to understand the dynamics of transitions, the pace of historic transitions is only partly a good guide to the future. We agree with Sovacool’s [1] argument that quicker transitions have happened in the past and may therefore also be possible in the future globally. The key reason for our optimism is that historic energy transitions have not been consciously governed, whereas today a wide variety of actors is engaged in active attempts to govern the transition towards low carbon energy systems. In addition, international innovation dynamics can work in favour of speeding up the global low-carbon transition. Finally, the 2015 Paris agreement demonstrates a global commitment to move towards a low carbon economy for the first time, thereby signalling the required political will to foster quick transitions and to overcome resistance, such as from incumbents with sunk infrastructure investments

An exploratory policy analysis of electric vehicle sales competition and sensitivity to infrastructure in Europe

This research contributes to discussions about policy interventions to stimulate the transition of vehicle technology. Concentrating on passenger cars, an extensive system dynamics based market agent model of powertrain technology transitions within the EU up to 2050 is employed. With a focus on subsidy scenarios for both infrastructure deployment and vehicle purchase, and set within the context of the EU fleet emission regulations, we find that there are important interactions between different powertrain types and with infrastructure provision. For example, strong plug-in electric vehicle (PiEV) policy could inhibit the maturity of hydrogen fuel cell vehicles. Infrastructure provision is important for improving the utility of a PiEV, but we find that in the early market it may have a weaker correlation with uptake than other policy options, until the PiEV stock share is over around 5%. Furthermore, an attempt to install a ratio of much more than one charge point per 10 PiEV may lead to little gains and high costs. PiEV sales are relatively insensitive at target levels over 25 PiEV per charge point. The results of our study can help policymakers to find the right balance and timing of measures targeting the transition towards low carbon alternative vehicles

Economic growth and development with low-carbon energy

Energy is needed for economic growth, and access to cheap, reliable energy is an essential development objective. Historically most incremental energy demand has been met through fossil fuels; however, in future that energy will have to be low carbon and ultimately zero‐carbon. Decarbonization can and needs to happen at varying speeds in all countries, depending on national circumstances. This article reviews the implications of a transition to low‐carbon energy on economic growth and development in current low‐income countries. It sets out empirical findings about trajectories for energy intensity and emissions intensity of economic growth; explores pathways to accelerate decarbonization; reviews the theoretical and empirical literature on economic costs and co‐benefits of energy decarbonization; and assesses analytical approaches. It discusses the opportunities that might arise in terms of a cleaner, more dynamic and more sustainable growth model, and the options for developing countries to implement a less‐carbon intensive model of economic developmen

Beyond Market Failures: The Market Creating and Shaping Roles of State Investment Banks

Recent decades witnessed a trend whereby private markets retreated from financing the real economy, while, simultaneously, the real economy itself became increasingly financialized. This trend resulted in public finance becoming more important for investments in capital development, technical change, and innovation. Within this context, this paper focuses on the roles played by a particular source of public finance: state investment banks (SIBs). It develops a conceptual typology of the different roles that SIBs play in the economy, which together show the market creation/shaping process of SIBs rather than their mere "market fixing" roles. This paper discusses four types of investments, both theoretically and empirically: countercyclical, developmental, venture capitalist, and challenge led. To develop the typology, we first discuss how standard market failure theory justifies the roles of SIBs, the diagnostics and evaluation toolbox associated with it, and resulting criticisms centered on notions of "government failures." We then show the limitations of this approach based on insights from Keynes, Schumpeter, Minsky, and Polanyi, as well as other authors from the evolutionary economics tradition, which help us move toward a framework for public investments that is more about market creating/shaping than market fixing. As frameworks lead to evaluation tools, we use this new lens to discuss the increasingly targeted investments that SIBs are making, and to shed new light on the usual criticisms that are made about such directed activity (e.g., crowding out and picking winners). The paper ends with a proposal of directions for future research