Financing Renewables in the Post-Subsidy Era
As mature renewable energy sources such as solar photovoltaics and onshore wind have evolved from a high-cost to an ultra-low-cost energy resource, the government subsidies for them are being removed. This means these technologies can no longer rely on a guaranteed stream of revenue with the government as the counter-party to their long term contracts. As a result, new frameworks of understanding about financing these technologies is necessary to successfully navigate this new normal. In this policy-oriented paper, we ask how to finance renewable when they are exposed to volatility of electricity market prices in addition to the output intermittency they naturally have? Can a liquid and competitive PPA market be developed that renewable generators hedge against electricity market price? What are the possible threats to long-term viability of mature renewables in the post subsidy era? The paper address these question uses the experience of market in which merchant investment in solar PV and onshore wind is happening. The paper then outlines some of the capital sources that should be tapped in order for renewables to realize its full potential. It also touches on some of the unlikely stakeholders – including oil and gas companies, energy-intensive technology companies, and governments – that could benefit from this transition.