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Abstract
Renewable energy investments require a substantial amount of capital to provide affordable and accessible energy for everyone in the world, and finding the required capital is one of the greatest challenges faced by governments and private entities. In a macroeconomic perspective, national budget deficits and inadequate policy designs hinder public and private investments in renewable projects. These problems lead governments to borrow a considerable amount of money for sustainable development, although such excessive debt-based financing pushes them to unsustainable economic development. This substantial amount of borrowing makes a negative contribution to the high global debt concentration, putting countries’ economic and social development at risk. In line with this, excessive debt-based financing causes an increase in wealth inequality, and when wealth inequality reaches a dramatic level, wars and many other social problems are triggered to correct the course of wealth inequality. In this regard, the motivation behind the study is to develop a set of policy guidelines for sustainable financing models as a solution for these intertwined problems, which are: (1) a financial gap in energy investments; (2) an excessive global debt concentration; and (3) a dramatic increase in wealth inequality. To this end, this study presents a quantitative and comparative proof of concept analysis of alternative financing models in a solar farm investment simulation to investigate the change in wealth inequality and social welfare by reducing debt-based financing and increasing public participation. There are many studies in the literature investigating the evolution of wealth inequality throughout history. However, there is a gap in the literature, and investigating the effects of various policy rules on the evolution of wealth inequality in a future time frame needs to be explored in order to discuss possible policy implications beforehand. In this respect, this paper contributes to the literature by developing simulation models for conventional and alternative financing systems. This enables investigating the changes in wealth inequality and social welfare as a result of various policy implications throughout the simulation time.
Highlights
Energy investments have a significant influence on economic growth and development, as widely discussed in the literature [1,2]
The main results of the seven scenarios in financing solar farms are summarized in Table 5, which were divided into the policies for comparison purposes and the proposed policy implications
These results indicated that the investment policy in Scenario 6 based on the proposed model had the best performance compared with the policies in the other six scenarios
Summary
Energy investments have a significant influence on economic growth and development, as widely discussed in the literature [1,2]. Renewable power was valued at USD 300 billion in 2017, accounted for two-thirds of power generation investments, and hit record levels of spending on solar photovoltaics (PVs) [3]. Despite such a considerable amount of current investments, renewables require an annual increase of at least 150% from the current trend between 2015 and 2050, the rapid advancements in technology reduce significantly the cost of harnessing clean energy [4]. These investments have crucial importance in truly providing affordable and accessible clean energy globally in order to achieve the Paris Agreement target, which is a promise to hold global temperature rise below 2 ◦C by 2050 [5]
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