Peer-to-Peer Financing Mechanisms to Accelerate Renewable Energy Deployment
Journal of Sustainable Finance & Investment, Vol. 1, No. 2, pp. 138-155, 2011
37 Pages Posted: 20 Feb 2012
Date Written: 2011
Despite the clear need to reduce greenhouse gas emissions, lack of access to capital and appropriate financing mechanisms has limited the deployment of renewable energy technologies (RETs). Feed-in Tariff (FIT) programs have been used successfully in many countries to make RETs more economically feasible. Unfortunately, the large capital costs of RETs can result in both the slow uptake of FIT programs and incomplete capture of deployment potential. Subsidies are concentrated in financial institutions rather than the greater population as traditional bank loans are required to fund RET projects. This paper critically analyzes and considers the political, financial and logistical risks of an innovative peer-to-peer financing mechanism. This mechanism has the goal of increasing RET deployment capacity under a FIT program in an effort to equitably distribute both the environmental and economic advantages throughout the entire population. Using the Ontario FIT program as a case study, this article illustrates how the guaranteed income stream from a solar photovoltaic system can be modeled as an investment and how peer-to-peer lending mechanisms can then be used to provide capital for the initial costs. The requirements for and limitations of these types of funding mechanisms for RETs are quantified and discussed and future work to deploy this methodology is described.
Keywords: Feed-in tariff, microfinance, peer to peer lending, renewable energy, funding innovation, photovoltaic, sustainability
JEL Classification: Q42
Suggested Citation: Suggested Citation