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

By Mariana Mazzucato, G. Semieniuk. 2018

219 citations recorded by the source corpus.

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.

Subfields: Accounting, Economics and Econometrics, Pollution

View Paper: https://www.semanticscholar.org/paper/29f3f53e3eeed37474bae8024a745394ee1dcd93

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Citations in the corpus

Low‐carbon transition risks for finance (2020, background): “Nor are the investments yet expected to be vastly more profitable—support policies have so far been required to attract private investors even in the advanced power supply sector (Mazzucato & Semieniuk, 2018; Polzin, Egli, Steffen, & Schmidt, 2019).”
Modelling innovation and the macroeconomics of low-carbon transitions: theory, perspectives and practical use (2019, unknown): “A debate also exists as to whether government or other finance of innovation in the early stages of the innovation chain crowds-out or crowds-in other private finance in later stages (Hottenrott & Rexhäuser, 2015; Mazzucato, 2011; Mazzucato & Semieniuk, 2017, 2018; Popp & Newell, 2012).”
Three green financial policies to address climate risks (2021, background): “Indeed, the instability provided by regulations aimed at increasing the appeal of green assets - which might be of lower credit quality than brown ones (Mazzucato and Semieniuk, 2018)- can be complemented by the expansionary effects of credit supply.”
Climate change challenges for central banks and financial regulators (2018, unknown): “Development banks have been at the 248 forefront of climate mitigation financing in recent years.(76,77) For instance, the European Investment Bank (EIB) 249 dedicates a minimum of 25% of its lending to climate action projects.”