Renewable Energy Investment and Business Models

Abstract

Despite the rapid growth in global investment in renewable energy technologies, in 2024, this amounted to a record high of USD 807 billion, but the majority of global energy transition is happening in some of the most advanced economies and in China, where together global REn discusses 90% of energy transition investments, particularly solar PV technologies (Solar PV: USD 554 billion, 69%). To achieve the internationally agreed climate targets, an estimated annual investment of nearly USD 1.4 trillion in renewable power has been needed between 2025 and 2030, almost double the current investment portfolio, highlighting the design of business models to mobilise and de-risk capital at scale as a current practitioner and policy concern. The primary models of renewable energy investment – including centralized utility-scale (CUPPA, YieldCo and merchant), distributed (direct ownership, TPO/L, SaaS subscription) and community based (energy cooperatives, community solar, crowdfunding) are examined and synthesized with their respective policy and capital market instruments: feed-in tariff, tax rebates, and green bonds. Adopting ideas from the energy-policy and operations-management literature, the paper classifies business models based on two dimensions: ownership structure, and deployment size, and provides a comparative analysis of the models based on illustrative examples of performance on the dimensions of capital-intensity, consumer-accessibility, scalability, risktransfer, and revenue-predictability. The study reveals that none of these business models is the superior one in all these attributes; corporate PPAs and YieldCos optimise for the largest scale and transfer of investor risk, but these are not the most accessible models of operation; community model and subscription model maximise accessibility, but at the expense of scalability and the amount of capital per unit of capacity. They end with policy implications for bridging the investment gap in emerging markets and suggestions for the way forward in research on hybrid and blended finance business model innovation.