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Energy

#5 Reasons why Energy Financing Should be Reinvented

The need of the hour is new financing solutions that are accessible, global and transparent
#5 Reasons why Energy Financing Should be Reinvented
Image credit: Shutterstock.com | Enhanced by Entrepreneur
Contributor
Co-Founder, WePower
4 min read

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

There is no doubt that transitioning our energy systems to fully green ones should be a priority for a sustainable living. Currently, only 24% of the planet's energy production comes from renewable resources. Despite the dropping costs and increasing efficiency of green energy technology, the investments into the sector have been fluctuating over the years. Reinventing the way green energy is financed is a challenge and we need to solve it to further green energy adoption.

Here are 5 reasons why:

1. Large Power Plants are Not as Large as They Used to Be

Energy financing industry has been built around a few very large production facilities each supplying energy to over 40,000 households on an average. The very nature of these production facilities requires complex project planning and development, which has led to a whole range of financial instruments that were built to support the big centralized projects.

The development of solar, wind and other renewable power generation facilities is very different by nature. They are on an average 50x smaller, more decentralized and faster to build than the old energy facilities. Green energy generation can now be built by both large and small developers as well as households. We thus cannot expect that the planning, funding and risk management structure that was developed for the old energy power plants can work for the renewable energy development.

2. Green Energy Production Costs are Dropping Every Year

Just a few years ago, energy production from renewable resources has been significantly more expensive than energy production from fossil fuels. However, the production costs have dropped significantly and will continue to drop further. Bloomberg's New Energy Finance Group estimates that the cost of new electricity from solar PV will drop by 66% by 2040 and the cost of new electricity from onshore wind will drop 47% by 2040. Green energy production costs are already comparable to the fossil fuels and the cost continues to drop. This makes it not only an attractive investment asset to institutional investors but also an accessible unsubsidized choice for every consumer.

3. Going Green Is In Demand but There Is No Easy Way to Contribute For the Public

In order to increase capital flow into the green energy sector, we need solutions that would allow public as the end consumer to choose what type of energy they want to buy. This would create equal opportunities for everybody to participate and drive green energy adoption regardless of whether they are an investment fund or an end consumer interested in a more sustainable living.

4. Better Financial Transparency and Accounting is Needed to Build Trust

Currently, green energy production and delivery accounting is done through a set of different energy certificates. However, these documents vary from country to country with no clear unified standard. Without a single unified system of measure, a cross-border effort, investment and accounting is extremely difficult. This is why we need open tracking and accounting solutions running on decentralized systems such as blockchain, to ensure transparency and trust in the system. A transparent and trustworthy system will boost the flow of green energy investments.

5. Climate Change Is a Global Challenge but Global Communities are Not Empowered to Tackle it

Energy financing is currently a very closed ecosystem. It has developed this way because before the Internet and other communication technology innovations, creating globally open systems was extremely difficult.

With the rise of the blockchain technology, we now have a way to share value in the same way as we share information on the web. We can now not only gather communities around a cause but also incentivize them to contribute. This contribution can empower such cases as cross-border financing, micro-financing, open-source development and many other new yet undiscovered solutions to green energy financing to emerge.

Green energy and sustainable living has captured our attention and interest many years ago. The ideas, solutions and technological development around it have been staggering. However, despite being the key enabler, innovation in green energy financing has been left relatively untouched. We need new financing solutions that would be accessible, global and transparent. With the rise of blockchain technology, there is no better time than now.

Opinions expressed by Entrepreneur contributors are their own.

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