Financing has been a significant hurdle in realizing the renewable energy (RE) transition, but targeted incentives and strategies have proven constructive in encouraging the implementation of RE projects. The lack of public awareness about the benefits of RE and misconceptions about its associated costs have contributed to the reluctance of investors and energy consumers to make this shift. With COVID-19 pandemic-related lockdowns leading to a drop in fossil fuel consumption and prices, it is crucial that necessary actions are taken to ensure the shift to RE is not reversed.

A new study reviewed the current status of RE and identified barriers to its uptake by individuals, corporations, and government-linked institutions. The study emphasized the importance of involving stakeholders in policymaking and offered alternatives to carbon taxation and global grid connectivity to achieve the renewable energy transition.

Here are the details (it’s quite a read but don’t worry – there are bullet points!):

Research rationale and Methodology: The study reviewed literature on renewable energy, financing, incentives, and the impact of the COVID-19 pandemic on the energy sector. The study also analyzed the role of financial institutions, international oil companies, and tech companies in supporting the RE Transition. The study further explored the need for public awareness of the benefits of RE to encourage investment in RE for a cleaner future.

Key takeaways:

Overview of Factors Affecting the RE Transition:

• Improvements in efficiency and performance have led to commercial success of RE after 2000.
• RE policies, public and private financing, research and development, and energy storage technologies are important factors affecting the RE Transition.
• Policy frameworks, such as Germany’s Energiewende, can successfully achieve capacity targets but may fail to reduce greenhouse gas emissions.
• Policy guidelines for RE Transition in different regions include using all available RE technologies and providing incentives for consumers and investors.
• Financing mechanisms, both public and private, are crucial for increasing the pace of the global RET, and energy storage technologies are necessary for effective implementation.

Barriers to the Achievement of the RET:

1. Government subsidies for fossil fuels: subsidies lower fuel prices and are a barrier to implementing clean energy projects.
2. Biases against renewable energy: conventional energy producers criticize RE as costly and unpredictable, impacting public perception of its reliability, security, and affordability.
3. Psychological factors: people may oppose RE integration due to the unfair distribution of associated benefits, and lack of public support leads to a lack of participation in wind projects.
4. Cost unawareness: large investors and governments are often not aware of market changes in the RE sector, leading to decisions based on outdated perspectives.
5. Oil companies as a barrier: some oil companies are reluctant to diversify their portfolios and invest in renewable energy.
6. Socio-economic conditions of society: inequality in socio-economic conditions is a barrier to the promotion of RE in societies.
7. Venture capitalists: VCs play a critical role in funding new technologies, and their interest in green energy initiatives is crucial for the RET.

Incentives and strategies to encourage RE investment:

• Types of incentives: R&D, fiscal and tax, market development, and grid connection and tariff incentives.
• R&D incentives are essential to improve existing RE technologies and establish self-reliance in RE production.
• Fiscal and tax incentives can waive taxes and duties on RE equipment imports, tax fossil fuel generation, and provide loans at minimal rates for constructing RE plants.
• Market development incentives can establish standard tariffs and certification for small power producers to promote the RE market.
• Grid connection and tariff incentives can ensure the availability of the power grid to accommodate additional power generated by RE producers and can be in the form of FiTs.
• Novel incentives proposed by Mihaylov et al. include using energy as digital currency, real-time incentive distribution rewards, and higher revenue for prosumers.

Strategies for the Renewable Energy Transition (RET)

This article discusses strategies for promoting the production and use of renewable energy (RE) under three outlooks: government and linked institutions, corporate strategies, and individual strategies.

1. Government and linked institutions

Creating Energy Financing Literature:

• Education of stakeholders on energy financing literature can help eliminate risks in RE project financing.
• Understanding the energy financial markets is essential to promote the RE Transition worldwide.
• Energy markets and business markets should be studied together as an interdisciplinary research field.

Alternative to Carbon Taxation:

• An alternative to carbon taxation is to bind energy producers to invest in RE systems.
• A portion of the revenue generated from hydrocarbons should be invested in RE technologies.
• Carbon taxation is more effective in countries with high trust in the government and low corruption.

Participation in Policy Making:

• The government’s role in policy formulation is crucial to transforming the current energy usage from fossil fuel-based technologies to RE.
• Societal participation is required for a socio-technological transition, which is composed of socio-technical systems, niche innovations, and the socio-technical landscape.
• Policymaking with stakeholder participation is vital for the RE Transition.

Global Grid and RE:

• Regional grids must be interconnected to provide backup power during seasonal production dips in a particular country.
• Interconnecting regional grids will promote the RE Transition worldwide.

1. Corporate Strategies:

• International oil companies need to invest in RE.
• Tech companies need to play a role in accelerating the RE Transition.

1. Individual Strategies:

• Households and small-scale businesses can adopt RE.
• Investment in RE projects by individuals and small businesses will promote the RE Transition.

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Paper Title: Incentives and strategies for financing the renewable energy transition: A review
Authors:
Sikandar Abdul Qadir a, Hessah Al-Motairi b, Furqan Tahir c, Luluwah Al-Fagih c,d,∗
a Division of Engineering Management & Decision Sciences, College of Science and Engineering, Hamad Bin Khalifa University, Qatar
Foundation, Doha, Qatar
b Department of Mathematics, Kuwait University, Kuwait City, Kuwait
c Division of Sustainable Development, College of Science and Engineering, Hamad Bin Khalifa University, Qatar Foundation, Doha, Qatar
d School of Computer Science & Mathematics at Kingston University London, Kingston upon Thames KT1 2EE, UK

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The full paper is under the Creative Commons License and is available here.