This chart is specific to renewables and understates the breadth of private capital inflows into broader energy transition investments in renewable energy. Beyond renewable investments, there has been a surge of interest over the past five years in biogas, biofuels and carbon-removal solutions such as direct air capture. With rapidly changing technology and innovative approaches, classifying energy transition projects is a challenge. Energy investments were once easily bifurcated into the categories of fossil fuels and low-carbon, but energy transition-related projects can increasingly be found within the categories of gas, batteries and lower-carbon liquid fuels, in addition to renewables.
The requirements and best mechanisms for financing these technologies are varied. Private credit’s capacity to offer greater flexibility in structuring loans and creating other forms of bespoke financing is a compelling option for cleantech developers, despite higher borrowing costs than traditional bank lending. This is particularly true for projects that fall outside of the scope, size, risk parameters or financial standardization most attractive to traditional banking.
The most-adopted technologies — solar photovoltaic and battery storage — are inexpensive, well understood in many markets and growing at rates that provide fundamental proof of their value proposition as a source of new electricity generation. But from a financing perspective, the scalability that makes these technologies suitable to a wide range of applications — from 10 panels on a rooftop with a battery pack in the garage to a football field-sized, utility-scale installation — puts many developments outside the scope of ordinary bank lending, project financing or infrastructure finance.
