What Kinds of Photovoltaic Projects Do Lenders Prefer to Finance?
Marcus, A.; Shrivastava, P.; Sharma, S. & Pogutz, S. (Eds.) (2011): Cross-Sector Leadership for the Green Economy: Integrating Research and Practice on Sustainable Enterprise. New York: Palgrave Macmillan, pp. 107-124
18 Pages Posted: 27 May 2012 Last revised: 18 Mar 2013
Date Written: September 1, 2011
What kinds of PV project configurations do lenders prefer to finance? Recent developments in the field of renewable energy project finance have reinforced the need for investigation, as fundraising has become more challenging and project evaluation by banks more demanding. To contribute to the limited research in this field, we focus on photovoltaic projects and report from an Adaptive Choice-Based Conjoint experiment with German experts in project finance. We find a bias which we call “debt for brands”. Simulations reveal that debt investors prefer projects with premium brand technology (modules, inverters) to low-cost technology. Although we assumed that lenders prefer projects with the highest Debt Service Cover Ratio (DSCR), they favor projects with lower DSCR, as long as those projects include premium brand technology. We find that, if premium brands were engaged, lenders would also choose projects with higher risk. Our findings have implications for renewable energy project finance in practice and research.
Keywords: project finance, renewable energy, photovoltaic, photovoltaik, business models, conjoint analysis, bankability, solar energy
JEL Classification: O30, G30, Q20, Q42
Suggested Citation: Suggested Citation