IDEAS home Printed from https://ideas.repec.org/p/sru/ssewps/2016-12.html
   My bibliography  Save this paper

Financing Renewable Energy: Who is Financing What and Why it Matters

Author

Listed:
  • Mariana Mazzucato

    (Science Policy Research Unit, University of Sussex.)

  • Gregor Semieniuk

    (Science Policy Research Unit, University of Sussex.)

Abstract

Accelerating innovation in renewable energy (RE) requires not just more finance, but finance servicing the entire innovation landscape. Given that finance is not "neutral", more information is required on the quality of finance that meets technology and innovation stage-specific financing needs for the commercialization of RE technologies. We investigate the relationship between different financial actors with investment in different RE technologies. We construct a new deal-level dataset of global RE asset finance from 2004 to 2014 based on Bloomberg New Energy Finance data, that distinguishes 10 investor types (e.g. private banks, public banks, utilities) and 11 RE technologies into which they invest. We also construct a heuristic investment risk measure that varies with technology, time and country of investment. We nd that particular investor types have preferences for particular risk levels, and hence particular types of RE. Some investor types invested into far riskier portfolios than others, and financing of individual high-risk technologies depended on investment by specific investor types. After the 2008 financial crisis, state-owned or controlled companies and banks emerged as the high-risk taking locomotives of RE asset finance. We use these preliminary results to formulate new questions for future RE policy, and encourage further research.

Suggested Citation

  • Mariana Mazzucato & Gregor Semieniuk, 2016. "Financing Renewable Energy: Who is Financing What and Why it Matters," SPRU Working Paper Series 2016-12, SPRU - Science Policy Research Unit, University of Sussex Business School.
  • Handle: RePEc:sru:ssewps:2016-12
    as

    Download full text from publisher

    File URL: http://www.sussex.ac.uk/spru/swps2016-12
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mariana Mazzucato & L. Randall Wray, 2015. "Financing the Capital Development of the Economy: A Keynes-Schumpeter-Minsky Synthesis," Economics Working Paper Archive wp_837, Levy Economics Institute.
    2. Daron Acemoglu & Ufuk Akcigit & Douglas Hanley & William Kerr, 2016. "Transition to Clean Technology," Journal of Political Economy, University of Chicago Press, vol. 124(1), pages 52-104.
    3. Margarita Kalamova & Christopher Kaminker & Nick Johnstone, 2011. "Sources of Finance, Investment Policies and Plant Entry in the Renewable Energy Sector," OECD Environment Working Papers 37, OECD Publishing.
    4. Stephen A. Ross, 2013. "The Arbitrage Theory of Capital Asset Pricing," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 1, pages 11-30, World Scientific Publishing Co. Pte. Ltd..
    5. Ramana Nanda & William R. Kerr, 2015. "Financing Innovation," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 445-462, December.
    6. Masini, Andrea & Menichetti, Emanuela, 2012. "The impact of behavioural factors in the renewable energy investment decision making process: Conceptual framework and empirical findings," Energy Policy, Elsevier, vol. 40(C), pages 28-38.
    7. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    8. Bronwyn Hall, 2004. "The financing of research and development," Chapters, in: Anthony Bartzokas & Sunil Mani (ed.), Financial Systems, Corporate Investment in Innovation, and Venture Capital, chapter 2, Edward Elgar Publishing.
    9. Lazonick, William & Tulum, Öner, 2011. "US biopharmaceutical finance and the sustainability of the biotech business model," Research Policy, Elsevier, vol. 40(9), pages 1170-1187.
    10. Mariana Mazzucato, 2013. "Financing innovation: creative destruction vs. destructive creation," Industrial and Corporate Change, Oxford University Press, vol. 22(4), pages 851-867, August.
    11. Ivan Haščič & Miguel Cárdenas Rodríguez & Raphaël Jachnik & Jérôme Silva & Nick Johnstone, 2015. "Public Interventions and Private Climate Finance Flows: Empirical Evidence from Renewable Energy Financing," OECD Environment Working Papers 80, OECD Publishing.
    12. Stern, Nicholas, 2015. "Why Are We Waiting? The Logic, Urgency, and Promise of Tackling Climate Change," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262029189, December.
    13. Sagar, Ambuj D. & van der Zwaan, Bob, 2006. "Technological innovation in the energy sector: R&D, deployment, and learning-by-doing," Energy Policy, Elsevier, vol. 34(17), pages 2601-2608, November.
    14. Cozzi, Giovanni & Griffith-Jones, Stephany, 2015. "Investment-led growth: a solution to the European crisis," Greenwich Papers in Political Economy 14062, University of Greenwich, Greenwich Political Economy Research Centre.
    15. Bergek, Anna & Mignon, Ingrid & Sundberg, Gunnel, 2013. "Who invests in renewable electricity production? Empirical evidence and suggestions for further research," Energy Policy, Elsevier, vol. 56(C), pages 568-581.
    16. Anil Bera & Sung Park, 2008. "Optimal Portfolio Diversification Using the Maximum Entropy Principle," Econometric Reviews, Taylor & Francis Journals, vol. 27(4-6), pages 484-512.
    17. Auerswald, Philip E & Branscomb, Lewis M, 2003. "Valleys of Death and Darwinian Seas: Financing the Invention to Innovation Transition in the United States," The Journal of Technology Transfer, Springer, vol. 28(3-4), pages 227-239, August.
    18. Langniss, Ole, 1996. "Instruments to foster renewable energy investments in Europe a survey under the financial point of view," Renewable Energy, Elsevier, vol. 9(1), pages 1112-1115.
    19. Mariana Mazzucato, 2015. "The Green Entrepreneurial State," SPRU Working Paper Series 2015-28, SPRU - Science Policy Research Unit, University of Sussex Business School.
    20. Mundaca, Luis & Luth Richter, Jessika, 2015. "Assessing ‘green energy economy’ stimulus packages: Evidence from the U.S. programs targeting renewable energy," Renewable and Sustainable Energy Reviews, Elsevier, vol. 42(C), pages 1174-1186.
    21. Foray, D. & Mowery, D.C. & Nelson, R.R., 2012. "Public R&D and social challenges: What lessons from mission R&D programs?," Research Policy, Elsevier, vol. 41(10), pages 1697-1702.
    22. Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-131, March.
    23. Andrea Masini & Emanuela Menichetti, 2013. "Investment decisions in the renewable energy sector: An analysis of non-financial drivers," Post-Print hal-00796331, HAL.
    24. Grubler, Arnulf, 2012. "Energy transitions research: Insights and cautionary tales," Energy Policy, Elsevier, vol. 50(C), pages 8-16.
    25. Stirling, Andy, 2010. "Multicriteria diversity analysis: A novel heuristic framework for appraising energy portfolios," Energy Policy, Elsevier, vol. 38(4), pages 1622-1634, April.
    26. K. J. Arrow, 1971. "The Economic Implications of Learning by Doing," Palgrave Macmillan Books, in: F. H. Hahn (ed.), Readings in the Theory of Growth, chapter 11, pages 131-149, Palgrave Macmillan.
    27. Polzin, Friedemann & Migendt, Michael & Täube, Florian A. & von Flotow, Paschen, 2015. "Public policy influence on renewable energy investments—A panel data study across OECD countries," Energy Policy, Elsevier, vol. 80(C), pages 98-111.
    28. Mariana Mazzucato & Caetano C.R. Penna, 2016. "Beyond market failures: the market creating and shaping roles of state investment banks," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 19(4), pages 305-326, October.
    29. Veugelers, Reinhilde, 2012. "Which policy instruments to induce clean innovating?," Research Policy, Elsevier, vol. 41(10), pages 1770-1778.
    30. Victoria Shestalova & Chiara Criscuolo & Nick Johnstone & Carlo Menon, 2014. "Renewable energy policies and cross-border investment: evidence from M&A in solar and wind energy," CPB Discussion Paper 288, CPB Netherlands Bureau for Economic Policy Analysis.
    31. Merton, Robert C, 1969. "Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 247-257, August.
    32. Chiara Criscuolo & Nick Johnstone & Carlo Menon & Victoria Shestalova, 2014. "Renewable Energy Policies and Cross-border Investment: Evidence from Mergers and Acquisitions in Solar and Wind Energy," OECD Science, Technology and Industry Working Papers 2014/3, OECD Publishing.
    33. Jaffe, Adam B. & Newell, Richard G. & Stavins, Robert N., 2005. "A tale of two market failures: Technology and environmental policy," Ecological Economics, Elsevier, vol. 54(2-3), pages 164-174, August.
    34. Andy Stirling, 2007. "A General Framework for Analysing Diversity in Science, Technology and Society," SPRU Working Paper Series 156, SPRU - Science Policy Research Unit, University of Sussex Business School.
    35. Popp, David & Hascic, Ivan & Medhi, Neelakshi, 2011. "Technology and the diffusion of renewable energy," Energy Economics, Elsevier, vol. 33(4), pages 648-662, July.
    36. Andrea Masini & E. Menichetti, 2012. "The impact of behavioural factors in the renewable energy investment decision making process: Conceptual framework and empirical findings," Post-Print hal-00651706, HAL.
    37. Mariana Mazzucato, 2016. "From market fixing to market-creating: a new framework for innovation policy," Industry and Innovation, Taylor & Francis Journals, vol. 23(2), pages 140-156, February.
    38. Gregor Semieniuk, 2016. "Fossil energy in economic growth: A study of the energy direction of technical change, 1950-2012," SPRU Working Paper Series 2016-11, SPRU - Science Policy Research Unit, University of Sussex Business School.
    39. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-337, May.
    40. Criscuolo, Chiara & Menon, Carlo, 2015. "Environmental policies and risk finance in the green sector: Cross-country evidence," Energy Policy, Elsevier, vol. 83(C), pages 38-56.
    41. Samuel Kortum & Josh Lerner, 2000. "Assessing the Contribution of Venture Capital to Innovation," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 674-692, Winter.
    42. Sterlacchini, Alessandro, 2012. "Energy R&D in private and state-owned utilities: An analysis of the major world electric companies," Energy Policy, Elsevier, vol. 41(C), pages 494-506.
    43. Miguel Cárdenas Rodríguez & Ivan Haščič & Nick Johnstone & Jérôme Silva & Antoine Ferey, 2014. "Inducing Private Finance for Renewable Energy Projects: Evidence from Micro-Data," OECD Environment Working Papers 67, OECD Publishing.
    44. Eyraud, Luc & Clements, Benedict & Wane, Abdoul, 2013. "Green investment: Trends and determinants," Energy Policy, Elsevier, vol. 60(C), pages 852-865.
    45. Owen, Geoffrey & Hopkins, Michael M., 2016. "Science, the State and the City: Britain's Struggle to Succeed in Biotechnology," OUP Catalogue, Oxford University Press, number 9780198728009.
    46. Andy Stirling, 2014. "Transforming Power: social science and the politics of energy choices," SPRU Working Paper Series 2014-03, SPRU - Science Policy Research Unit, University of Sussex Business School.
    47. Shikhar Ghosh & Ramana Nanda, 2010. "Venture Capital Investment in the Clean Energy Sector," Harvard Business School Working Papers 11-020, Harvard Business School.
    48. Mariana Mazzucato & Caetano Penna, 2015. "The Rise of Mission-Oriented State Investment Banks: The Cases of Germany’s KfW and Brazil’s BNDES," SPRU Working Paper Series 2015-26, SPRU - Science Policy Research Unit, University of Sussex Business School.
    49. Wüstenhagen, Rolf & Menichetti, Emanuela, 2012. "Strategic choices for renewable energy investment: Conceptual framework and opportunities for further research," Energy Policy, Elsevier, vol. 40(C), pages 1-10.
    50. repec:bof:bofrdp:urn:nbn:fi:bof-201512141480 is not listed on IDEAS
    51. Masini, Andrea & Menichetti, Emanuela, 2013. "Investment decisions in the renewable energy sector: An analysis of non-financial drivers," Technological Forecasting and Social Change, Elsevier, vol. 80(3), pages 510-524.
    52. Tietjen, Oliver & Pahle, Michael & Fuss, Sabine, 2016. "Investment risks in power generation: A comparison of fossil fuel and renewable energy dominated markets," Energy Economics, Elsevier, vol. 58(C), pages 174-185.
    53. Szabó, Sándor & Jäger-Waldau, Arnulf & Szabó, László, 2010. "Risk adjusted financial costs of photovoltaics," Energy Policy, Elsevier, vol. 38(7), pages 3807-3819, July.
    54. James R. Brown & Steven M. Fazzari & Bruce C. Petersen, 2009. "Financing Innovation and Growth: Cash Flow, External Equity, and the 1990s R&D Boom," Journal of Finance, American Finance Association, vol. 64(1), pages 151-185, February.
    55. Mariana Mazzucato & Gregor Semieniuk, 2017. "Public financing of innovation: new questions," Oxford Review of Economic Policy, Oxford University Press, vol. 33(1), pages 24-48.
    56. Masini, Andrea & Menichetti , Emanuela, 2013. "Investment Decisions in the Renewable Energy Sector: An Analysis of Non-Financial Drivers," HEC Research Papers Series 976, HEC Paris.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Polzin, Friedemann, 2017. "Mobilizing private finance for low-carbon innovation – A systematic review of barriers and solutions," Renewable and Sustainable Energy Reviews, Elsevier, vol. 77(C), pages 525-535.
    2. Corrocher, Nicoletta & Cappa, Elisabetta, 2020. "The Role of public interventions in inducing private climate finance: An empirical analysis of the solar energy sector," Energy Policy, Elsevier, vol. 147(C).
    3. Heiskanen, Eva & Jalas, Mikko & Juntunen, Jouni K. & Nissilä, Heli, 2017. "Small streams, diverse sources: Who invests in renewable energy in Finland during the financial downturn?," Energy Policy, Elsevier, vol. 106(C), pages 191-200.
    4. Darmani, Anna, 2015. "Renewable energy investors in Sweden: A cross-subsector analysis of dynamic capabilities," Utilities Policy, Elsevier, vol. 37(C), pages 46-57.
    5. Schmidt, Tobias S. & Battke, Benedikt & Grosspietsch, David & Hoffmann, Volker H., 2016. "Do deployment policies pick technologies by (not) picking applications?—A simulation of investment decisions in technologies with multiple applications," Research Policy, Elsevier, vol. 45(10), pages 1965-1983.
    6. Curtin, Joseph & McInerney, Celine & Ó Gallachóir, Brian, 2017. "Financial incentives to mobilise local citizens as investors in low-carbon technologies: A systematic literature review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 75(C), pages 534-547.
    7. Can Şener, Şerife Elif & Sharp, Julia L. & Anctil, Annick, 2018. "Factors impacting diverging paths of renewable energy: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 81(P2), pages 2335-2342.
    8. Tao, Zhenmin & Moncada, Jorge Andrés & Poncelet, Kris & Delarue, Erik, 2021. "Review and analysis of investment decision making algorithms in long-term agent-based electric power system simulation models," Renewable and Sustainable Energy Reviews, Elsevier, vol. 136(C).
    9. Polzin, Friedemann & Egli, Florian & Steffen, Bjarne & Schmidt, Tobias S., 2019. "How do policies mobilize private finance for renewable energy?—A systematic review with an investor perspective," Applied Energy, Elsevier, vol. 236(C), pages 1249-1268.
    10. Salm, Sarah & Wüstenhagen, Rolf, 2018. "Dream team or strange bedfellows? Complementarities and differences between incumbent energy companies and institutional investors in Swiss hydropower," Energy Policy, Elsevier, vol. 121(C), pages 476-487.
    11. Toka, Agorasti & Iakovou, Eleftherios & Vlachos, Dimitrios & Tsolakis, Naoum & Grigoriadou, Anastasia-Loukia, 2014. "Managing the diffusion of biomass in the residential energy sector: An illustrative real-world case study," Applied Energy, Elsevier, vol. 129(C), pages 56-69.
    12. Deleidi, Matteo & Mazzucato, Mariana & Semieniuk, Gregor, 2020. "Neither crowding in nor out: Public direct investment mobilising private investment into renewable electricity projects," Energy Policy, Elsevier, vol. 140(C).
    13. Elie, Luc & Granier, Caroline & Rigot, Sandra, 2021. "The different types of renewable energy finance: A Bibliometric analysis," Energy Economics, Elsevier, vol. 93(C).
    14. MacDougall, Shelley L., 2015. "The value of delay in tidal energy development," Energy Policy, Elsevier, vol. 87(C), pages 438-446.
    15. Blondiau, Yuliya & Reuter, Emmanuelle, 2019. "Why is the grass greener on the other side? Decision modes and location choice by wind energy investors," Journal of Business Research, Elsevier, vol. 102(C), pages 44-55.
    16. Polzin, Friedemann & Migendt, Michael & Täube, Florian A. & von Flotow, Paschen, 2015. "Public policy influence on renewable energy investments—A panel data study across OECD countries," Energy Policy, Elsevier, vol. 80(C), pages 98-111.
    17. Geraldine Ang & Dirk Röttgers & Pralhad Burli, 2017. "The empirics of enabling investment and innovation in renewable energy," OECD Environment Working Papers 123, OECD Publishing.
    18. Ming, Zeng & Ximei, Liu & Yulong, Li & Lilin, Peng, 2014. "Review of renewable energy investment and financing in China: Status, mode, issues and countermeasures," Renewable and Sustainable Energy Reviews, Elsevier, vol. 31(C), pages 23-37.
    19. Geddes, Anna & Schmidt, Tobias S., 2020. "Integrating finance into the multi-level perspective: Technology niche-finance regime interactions and financial policy interventions," Research Policy, Elsevier, vol. 49(6).
    20. Abiola John Asaleye & Charity Aremu & Adedoyin Isola Lawal & Adeyemi A. Ogundipe & Henry Inegbedion & Olabisi Popoola & Adewara Sunday & Olusegun Barnabas Obasaju, 2019. "Oil Price Shock and Macroeconomic Performance in Nigeria: Implication on Employment," International Journal of Energy Economics and Policy, Econjournals, vol. 9(5), pages 451-457.

    More about this item

    Keywords

    renewable energy nance; direction of innovation; nancial actor types; deployment; technology risk; investment portfolio;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sru:ssewps:2016-12. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/spessuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: University of Sussex Business School Communications Team (email available below). General contact details of provider: https://edirc.repec.org/data/spessuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.