Managing Credit Risk and Improving Access to Finance in Green Energy Projects
Dhruba, Purkayastha | August 2018
Abstract
The cost of finance has a relatively high impact on the returns and viability of clean energy projects compared with fossil fuel-based energy projects, because the operating costs for renewable energy projects are very low. Credit risk assessment and ratings, which have usually been an inappropriate measure of credit risk for clean energy finance, have a significant influence on the cost of finance. Factors like inadequate credit information, a lack of historical data at the project level, and the higher risk of technological obsolescence lead to credit market failure in clean energy finance, leading to mispricing of risk and poor capital allocation to clean energy infrastructure in the economy. Access to institutional finance is more constrained in the distributed renewable energy sector, as the transaction costs are high, consumer credit risk is high or unknown, and a variety of other challenges exist. It is important to ease these constraints, through appropriate policy and financing interventions to crowd in domestic banks, by improving the quality of credit information, both technical and commercial, creating suitable financial intermediaries, and providing risk mitigation solutions.
Citation
Dhruba, Purkayastha. 2018. Managing Credit Risk and Improving Access to Finance in Green Energy Projects. © Asian Development Bank Institute. http://hdl.handle.net/11540/8634.Keywords
Household Energy Consumption
Industrial Energy Consumption
Results-Based Monitoring And Evaluation
Evaluation Techniques
Evaluation Studies
Evaluation Methods
Commercial Energy
Urban Development Finance
Trade Finance
Small Business Finance
Rural Finance
Roundtable on International Trade and Finance
Regional Development Finance
Public Service Finance
Public Finance
Project Finance
Private Finance
Nonbank Financing
Non-Bank Financial Institutions
Municipal Finance
Local Government Finance
Local Currency Financing
Limited Resource Financing
International Financial Institutions
Infrastructure Financing
Industrial Finance
Government Financial Institutions
Government Finance
Financing of Infrastructure
Financial Sector Development
Financial Regulation
Domestic Energy
Energy Demand
Energy Prices
Energy Pricing Policy
Energy Supply
Primary Energy Supply
Development Indicators
Social Participation
Low Income Groups
Income Generation
Newly Industrializing Countries
Taxation
Public Accounting
National Budget
Municipal Bonds
Local Government
Local Taxes
International Monetary Relations
International Financial Market
International Banking
Central Banks
Business Financing
Capital Resources
Budgetary Policy
Capital Needs
Corporate Divestiture
Capital Instruments
Pension Funds
Insurance Companies
Banks
Portfolio Management
Fiscal Administration
Economics of Education
Development Banks
Renewable energy resource
Green Energy
Power resource
Electric power
Energy development
Renewable energy resource
Solar
Energy assistance
Energy tax credit
Electric power consumption
Cost effectiveness
Supply and demand
Prices
Energy resource
Energy consumption
Price Indexes
Infrastructure
Use tax
Taxing power
State of taxation
Tax-sales
Tax revenue estimating
Tax planning
Spendings tax
Special assessments
Tax administration and procedure
Sales tax
Real property and taxation
Progressive taxation
Effect of taxation on land use
Effect of taxation on labor supply
Intergovernmental tax relations
Inheritance and transfer tax
Energy tax
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