Financing energy efficiency investments

Although it is widely accepted that investments directed to the improvement of energy efficiency have high rates of economic and social return, the majority of these projects remain unimplemented. According to Shi (2007), about 80% of projects surveyed recovered investment costs within 30 months through energy cost savings. The root of the problem is not the lack of capital, but it is the lack of organizational and institutional mechanisms for the implementation of projects. Especially, the current financing mechanisms of these projects remain inefficient. Banks are unwilling to give credits for energy efficiency investments because of uncertainty and lack of experience in this field. High centralization in the distribution of financial resources doesn’t let finance adequately the improvement of energy efficiency of public buildings (schools, hospitals). It means there is urgent need for the introduction of new financing mechanisms of energy efficiency projects. 

Dear bloggers,  please, share your thoughts on financing options of energy efficiency investment projects.


Financing energy efficiency investments — 1 комментарий

  1. Basically, I agree that “the root of the problem is … the lack of organizational and institutional mechanisms...” — but that is in the dead end. In economy, as far as I know, a business entity is subject to both internal and external environmental factors such as finance, research and development, purchasing, operations and accounting — at micro level; and Political, Economical, Social, Technological, Environmental and Legal — at macro level.

    Efficient mix of these factors contemporaneously creates effective business entity and the environment, while banking alone can do nothing! Erroneous operation of any above factors may lag business behind, cause fallacies or scare investment flows.

    You also noted — “Urgent need for the introduction of new financing mechanisms…” — I wish that “financing mechanisms” would be “magic arcanum” for all investment solutions and social returns. Unfortunately, that is not true! There are hundredths of other the micro/macro-environmental factors that need attention.

    To be more precise, we cannot attain “investments directed to the improvement of energy efficiency” by only means of restructuring banking mechanisms but by considering micro/macro-environmental factors play pivotal role.

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