These days, governments across the globe are investing in renewable energy in trillions. But developing companies are falling short of this amount and seeking investment in this particular domain. The amount desired by such countries is perhaps much more than what can be possibly raised through public funds alone. The difference can be derived by seeking private capital. However, when private capital is sought for clean energy projects, there are several obstacles faced. It might impose additional cost and risk, thereby dampening investor interest.
Need for cleaner energy systems
Developing, emerging economies are expected to transition smoothly to much cleaner and safer energy systems. The need for global efforts is felt to mobilize as well as channel a huge surge in required investment. It will be necessary for the Project Finance Advisory to find out which projects should be financed on a priority basis. The objective is to switch to cleaner energy as quickly as possible to reduce carbon footprint and the environment as a whole.
Know the best practices concerning renewable energy funding
- Specific clean energy initiatives: Multi-year energy strategies combined with short-term targets will be essential especially for retiring fossil fuel-based plants. Constructing renewable energy can provide a solid foundation to lay conducive policies. Also will be useful to set up carbon-pricing mechanisms or carbon markets including legislation/government around carbon elimination.
- Transparent, regulated power arrangements: There should be established greater predictability and transparency. This is to ensure investors with an absurdity to recover their power generation investments. Some instances involving such policies include standardized, bankable PPA (power purchase agreement) templates, allowing IPPs (independent power producers), and fair, transparent public participation and rate adjustments.
- Innovative financing mechanisms: There are different types of financing mechanisms that when introduces can help mitigate risks. It can also help develop investment opportunities or offer extra return potential. Risk mitigation can also be in the form of offering a currency hedge. Decarbonization targets can be achieved by conditioning financing costs.
- Business-friendly measures: Numerous general policies exist that help facilitates making investments in renewable energy projects. It includes tax policies (like not withholding taxes upon profits along with no VAT for sales of clean power). It also includes FDI (foreign direct investment), foreign ability/currency for profit repatriation, and enhanced permitting processes.
- Early risk assumption: An early sponsor assuming different types of risks are good example of numerous successful projects. After ameliorating certain project-related risks, the sponsor can attract less expensive or additional capital. Initially assume the full equity risk and search for debt financing after completing construction. International development organizations can be of help.
The truth is that developing economies are expected to act quickly to promote renewable energy. Actions taken now can help curtail carbon emissions considerably, thereby protecting the planet and lives. Hence, there will be desired funding to boost renewable energy projects.
How to apply for venture capital funding in india
Investment in tech startups, like other firms, requires expertise in the respective field. Moreover, Investing in startups is very risky and highly speculative, and investments should not be made by anyone who cannot afford to risk the entire investment. You should carefully consider the risks associated with the type of investment, security, and business before making any investment decision.
Similarly, JC Team Capital, with the required skills and expertise, is a venture capital firm in Canada with a history of various successful investments in tech startups. Such tech startups, with proper guidance, grew into established businesses.