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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

Florian Lüdeke-Freund

University of Hamburg, Chair of Capital Markets and Management; Leuphana University, Centre for Sustainability Management (CSM)

Moritz Loock

University of Saint Gallen - Good Energies Chair for Management of Renewable Energies

Date Written: September 1, 2011

Abstract

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

Lüdeke-Freund, Florian and Loock, Moritz, What Kinds of Photovoltaic Projects Do Lenders Prefer to Finance? (September 1, 2011). 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. Available at SSRN: https://ssrn.com/abstract=2067058

Florian Lüdeke-Freund (Contact Author)

Leuphana University, Centre for Sustainability Management (CSM) ( email )

Faculty of Sustainability
Scharnhorststr. 1
Lüneburg, 21335
Germany

University of Hamburg, Chair of Capital Markets and Management ( email )

Faculty of Business, Economics & Social Sciences
Von-Melle-Park 9
Hamburg, 20146
Germany

HOME PAGE: http://www.SustainableBusinessModel.org

Moritz Loock

University of Saint Gallen - Good Energies Chair for Management of Renewable Energies ( email )

Tigerbergstrasse 2
St. Gallen, St. Gallen CH-9000
Switzerland

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