The Likely Impact of Basel III on a Bank's Appetite for Renewable Energy Financing

17 Pages Posted: 17 Oct 2013

See all articles by Patrick A. Narbel

Patrick A. Narbel

Norwegian School of Economics (NHH)

Date Written: October 17, 2013

Abstract

The new Basel III regulations are likely to make long-term financing more expensive, which will affect the financing of capital-intensive renewable energy technologies, because they typically rely on long-term financing. In addition, the capital and liquidity requirements of Basel III are likely to limit the amount of capital available for renewable energy financing from banks in the future. Together, these are threats to renewable energy deployment because limited financing may prevent the financing of some projects and because more expensive loans are likely to make a number of projects uninteresting financially. A potential solution is proposed here, which requires financing capital-intensive energy projects, pooling these investments into a portfolio and selling down the portfolio in tranches to various types of investors. The benefit of this solution for banks is that it will allow them to maintain the financing of capital intensive renewable energy projects, while complying more easily with Basel III.

Keywords: renewable energy financing; Basel III; capital-intensive energy projects

JEL Classification: Q00; Q20; Q40

Suggested Citation

Narbel, Patrick A., The Likely Impact of Basel III on a Bank's Appetite for Renewable Energy Financing (October 17, 2013). NHH Dept. of Business and Management Science Discussion Paper No. 2013/10. Available at SSRN: https://ssrn.com/abstract=2341519 or http://dx.doi.org/10.2139/ssrn.2341519

Patrick A. Narbel (Contact Author)

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway

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