Financing clean power: a risk-based approach to choosing ownership models and policy/finance instruments

The report argues that the cost of the low-carbon energy transition can be minimized by correctly allocating investment risks—such as construction, price, and curtailment—between private investors, public entities, and consumers. It introduces a framework to identify key risks based on technology and country context, select an appropriate ownership model, and use specific instruments (like guarantees or Feed-in Tariffs) to fill risk gaps. Case studies suggest that optimizing risk allocation could reduce levelized costs by 10% for onshore wind in New York and 30-40% for solar in India.

• Correct risk allocation minimizes the overall costs of power investments, including operating, capital, and financing costs, by ensuring each risk is borne by the party best placed to manage, understand, and bear it.
• The ideal allocation of risk depends on the technology type; for example, flexible generation like CCGTs should bear price and curtailment risk to encourage efficient dispatch, whereas renewable owners have limited ability to manage these risks once built.
• Country context significantly influences risk allocation; in India, public entities may be better suited to manage development risks like land acquisition and grid connection due to bureaucratic and politicized planning rules.
• Ownership models provide a baseline for risk allocation, ranging from direct public ownership (taxpayer risk) to pure private ownership (investor risk), with intermediate models like PPPs or regulated finance sharing risks.
• Specific policy and finance instruments can be used to 'fine tune' risk allocation where ownership models leave gaps. These include public finance instruments (grants, guarantees), government contracts (PPAs), regulatory instruments, and policy mechanisms (Feed-in Tariffs).
• A case study of private merchant onshore wind in New York State suggests that transferring wholesale price risk to consumers via a fixed-price PPA or Feed-in Tariff could reduce the private cost of capital by 120-200 bps and overall levelized costs by at least 10%.
• A case study of private solar investment in India indicates that reallocating price, development, curtailment, and currency risks to public entities or consumers could reduce levelized costs by 30-40%.
• The report identifies price/offtake, curtailment, and development risks as critical areas for future quantitative analysis, as they have a major impact on the cost of renewable energy.

APA

Steggals, W., Nelson, D., & Stigliani, G. (2017). Financing clean power: a risk-based approach to choosing ownership models and policy/finance instruments. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2017/09/Financing-clean-power-a-risk-based-approach-Sept-2017.pdf

Chicago

Steggals, Will, David Nelson, and Gaia Stigliani. Financing clean power: a risk-based approach to choosing ownership models and policy/finance instruments. Climate Policy Initiative, 2017. https://www.climatepolicyinitiative.org/wp-content/uploads/2017/09/Financing-clean-power-a-risk-based-approach-Sept-2017.pdf.

Wikipedia

{{cite report |last1=Steggals |first1=Will |last2=Nelson |first2=David |last3=Stigliani |first3=Gaia |title=Financing clean power: a risk-based approach to choosing ownership models and policy/finance instruments |publisher=Climate Policy Initiative |date=August 2017 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2017/09/Financing-clean-power-a-risk-based-approach-Sept-2017.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{steggals2017financing, author = {Steggals, Will and Nelson, David and Stigliani, Gaia}, title = {{Financing clean power: a risk-based approach to choosing ownership models and policy/finance instruments}}, institution = {Climate Policy Initiative}, year = {2017}, month = aug, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2017/09/Financing-clean-power-a-risk-based-approach-Sept-2017.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }