Abstract
Several countries have set targets and implemented policies to increase the share of renewable energy sources. Whether or not those targets will eventually be met critically hinges upon the effectiveness of policies to mobilize private investment. An implicit assumption shared by many policy makers is that there is a positive correlation between renewable energy policies and private investment. However, just as energy policy can create opportunities, it can also create risk, and perceptions may differ between policy makers and investors. This paper adds to a growing stream of research in Energy Policy that empirically investigates investor perceptions of policies, and their influence on investment decision-making. Based on a survey of 29 venture capital investors conducting 1,064 experimental investment decisions, we show that high levels of regulatory exposure have a significantly negative effect on their likelihood to invest in renewable energy. However, venture capitalists are less risk- averse when it comes to low levels of regulatory exposure. Our findings suggest that investors’ worldviews are an important moderating factor: respondents who expose strong “free-market” worldviews are more risk-averse under high levels of regulatory exposure than other investors.
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