Finance in global transition scenarios: Mapping investments by technology into finance needs by source

Numerous studies have presented scenarios regarding energy transition, including the computation of investment costs in various models. Although these studies project detailed investment pathways for different technologies, they do not distinguish between different sources of and types of funding. They tell us what the transition will cost, but not how it will have to be financed. In this paper, we develop a methodology according to which an appropriate financing mix can be calculated from these investment projections based on technology-related assumptions in scenarios. We differentiate between debt and equity as well as between the following sources: public/private Research, Development and Demonstration (RD&D), small-distributed financing, venture capital (equity), public markets (equity), and asset finance (debt and equity provided by institutional investors). We show that major commitments to wind and solar energy need to come from institutional investors in the form of asset finance. In addition, to achieve the transition to a decarbonized power system, government and private investors need to continue investing and extend their engagement in funding research, demonstration, and early deployment. Finally, we present a number of policy options targeting the different sources of finance. (c) 2021 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license (http:// creativecommons.org/licenses/by/4.0/).

Automated summary

Numerous studies have provided scenarios on energy transition, but lack information on financing. An appropriate financing mix should be calculated based on investment projections according to different technology assumptions. Major commitments to wind and solar energy require asset finance from institutional investors.