Thread by @FlorianDRX

Low-carbon finance webinar from @CmccClimate with @BjarneSteffen and Tobias S Schmidt from @ETH_EPG started. Some take-aways:

https://twitter.com/FlorianDRX/status/1066874167671341057

Relevance to look at finance conditions for renewables = specific feature of high capital intensity compared to non-renewables

In this regard, work has been done on 4 topics: analysis of corporate vs. non-recourse project finance, evolution of cost of capital for project-financed RE, state investment bank (SIBs) policies for investment and multilateral bank (MDBs) investment policies.

1st paper [bit.ly/dyn-fin] focuses on characteristics and underlying drivers of non-recourse project funding of REs, applied to a dataset of German RE projects

General conclusion: high share of project finance for RE projects in Germany. Main reason: small balance sheets of relatively new players, not big enough to receive corporate finance.

Further analysis of drivers broken down in 4 steps: [1] mapping of project finance data, [2] investor interviews, [3] regression analysis of experience curves and [4] split-up of LCOE into technology efficiency cost effects.

[1] Historic development of cost of capital: large decrease during the last 18 years, both for solar PV and onshore wind

[2] Different drivers responsible for cost changes: overall economy, renewable energy sector and RE finance industry

[3] Estimation of effects of experience and general interest rate effects.

and [4] identification of cost of capital dynamics on the levelised cost of energy (LCOE): main decrease (60 %) in capital expenditure, 40 % due to financing cond. For financing decrease: Solar PV = decrease mainly due to lower capital expenditure <-> Wind = experience effect

3rd paper on state investment bank (SIBs) policies [bit.ly/SIBs-inv]. Main conclusion: found to crowd-in private finance, leverage for RE development. Case study comparison of 3 state investment banks [DE, UK, AU]

Method: 56 semi-structured interviews with investors and developers in SIBs. Conclusion: SIBs have much more roles than only capital provision, for example: de-risking/guarantees, educational role [importance of internal technical expertise!], signalling role & first/early mover.

4th paper: Multilateral Development Banks policies in RE investment [bit.ly/eth-paper] -> power generation of developing countries crucial for #climatechange. Q: MDBs take the role of SIBs in dev. countries? M: analysis of 857 projects (2005-15) + 12 MDB expert interviews

First conclusion: changes in new RE investment, technology-specific differences

Different RE investment policies between multilateral development banks:
-> "On top" of fossil [@EBRD, @EIB, @the_IDB, @IFC]
-> Fossil substituion with RE [@AfDB_Group, @WorldBank]
-> Hydro substituion with RE [@ADB_HQ, @AgendaCAF]
-> Mainly growth in fossil fuels [@isdb_group]

Other conclusion: stark difference between public branches [lending to governments] and private [lending to industry] in MDBs -> much higher share for fossil in public branches of multilateral development banks + differences between MDBs.

Webinar conclusions:
-> Renewables rely heavily on project finance, so banks are important factor and cost of capital (interest payments + dividents) is important factor
-> Reductions of cost of capital = driver for lower LCOE: financing exp. and gen. interest rate level effect.

[...] cont. conclusions:
-> Public banks can be a powerful policy instrument to enhance financing conditions and lower the cost of capital for new technologies (!)
-> [for modellers] More need for technology- and time-specific cost of capital analysis, no more uniform discount..

Note: thread summarized at: threadreaderapp.com/thread/1067393…