FINANCIAL RISKS OF RENEWABLE ENERGY: CURRENT SITUATION AND IMPLICATIONS FOR DEVELOPING COUNTRIES

Abstract

The study of the current state of the renewable energy sources (RES) sector as an important area for reducing harmful emissions into the atmosphere makes it possible to identify a circle of subjects – participants in the RES electricity market. The financial risks they take largely determine the present and future of this innovative market in terms of investment, financing, lending, insurance, regulation, and incentives. The renewable energy market is of particular interest to investors, financial institutions, the state setting the rules of the game and stimulating its development. The financial risks of market participants as the probability of monetary losses and losses are manifested at all stages of the development and implementation of renewable energy projects, from the development of technologies to public procurement of generated electricity. The analysis made it possible to identify the features of financing renewable energy projects, in particular, high initial financial costs, long payback periods for projects requiring long-term lending, sensitivity to regulatory and legal changes on the part of the state in terms of purchase prices for electricity, subsidies and incentive benefits for its producers and financial institutions – participants. Based on specific examples of renewable energy projects, the risks of banks, insurers in Vietnam and a number of developing countries in South Asia that provide green loans and green insurance products to companies implementing renewable energy projects, as well as households producing electricity from solar systems, are considered. Recommendations were formulated for national financial regulators, banking institutions, insurance companies to ensure acceptable financial conditions for renewable energy projects and adequately assess their own financial risks.