Finance

The clean energy policy resources—reports, data, and tools—that are provided here encompass deployment programs, financial incentives and regulations.

Incentive/Instrument

Governments, utilities, development banks, green banks and the private sector have several tools at their disposal that can help address barriers to clean energy investments. Incentives are policies that reduce the capital expenditures for an investment and in some cases can also help reduce the cost of financing. Instruments are financial structures and agreements that provide financial products or contractual agreements that provide cash flows.

• Asset-backed Securities
• Capital Subsidies, Grants and Rebates
• Clean Energy Funds
• Concessional Loans
• Credit Enhancement and Insurance
• Direct Public Investment
• Feed-in Tariffs
• Finance for Energy Access
• Green Banks
• Loan Guarantees
• Microfinance
• Net Metering and Net Billing
• Performance Based Incentives (PBI)
• Performance Contracting and Energy Service Companies
• Power Purchase Agreements
• Public/Utility Benefit Fund
• Tax Incentives
• Tenders and Reverse Auctions
• Tradable Certificates
• Yieldcos

Investor

Investors include those who can provide cash, can purchase stocks or bonds, or can loan to clean energy projects. Investors have their own appetite for risk and preference for types of projects, investment lengths and return rates. Accordingly, investors may focus on specific technologies and applications, markets, and stages of the business development cycle.

• Corporate
• Crowd/Social Funding
• Development Banks
• Government
• Guarantor/Insurer
• Industrial End Users
• Institutional
• Private Equity
• Private Sector Lenders
• Residential
• Small and Medium Enterprises
• Tax Investors
• Utilities

Investment

Each type of capital maps to different investor classes and may come with specific stipulations. For example, equity investments imply ownership. Clean energy companies, project developers and direct investors will likely use a portfolio of different types of content, depending on the stage of development the project or company is in and considering the overall cost of capital.

• Angel
• Balance Sheet
• Bond
• Climate Finance
• Equity
• Lease or Service Contract
• Loan
• Mezzanine
• Public Market
• Tax Equity

Barriers

Despite being widely deployed in a variety of markets and being considered as proven and commercialized technologies, clean energy projects and companies may face challenges accessing investment and finance owing to systemic risks and a lack of experience through the project development and financing process. Public and private sector incentives and instruments and other efforts, such as capacity building programs and the policy and regulatory environment are potential solutions.

• Access to Capital
• Fossil Fuel Subsidies
• High Upfront Costs
• Lack of Existing Market
• Low Knowledge Capacity
• Need for Public Funds Management
• Split Incentives

Market Stage

The level of market activity and size of the ecosystem of local technologies supplier, developers, financiers and investors can impact risks and thus the types of incentives and instruments needed to support project development. Nascent markets are likely to require stronger policy signals and programs that address higher risks and resulting cost of capital, whereas mature markets with significant project pipelines are less reliant on public sector programs.

• Fully Developed
• Initial Activity
• No Market

Economy

Economic development can affect the overall financing and investment ecosystem. There are also often general correlations between stage of economic growth and the number and degree that barriers exist. Policymakers will need to consider the economic profile of their jurisdiction when designing incentives and instruments.

• Developed
• Developing
• Large Emerging Economies
• Least Developed

Jurisdiction

Policymakers, utilities and development banks focus on specific geographic areas, including at the regional level, at the country level or at the municipal or county/provincial level. Certain incentives and instruments may make more sense for a given jurisdiction.

• National
• Regional
• Subnational

See Also

• Cost Recovery/Allocation
• Feebates
• Green Power/Voluntary RE Purchases
• Pricing Schemes
• Public Tenders, Procurement, and Lead Examples
• Public-private Partnerships
• Rural Energy Funds