Discussion Papers, Department of Business and Management Science, Norwegian School of Economics (NHH)
Patrick A. Narbel
The likely impact of Basel III on a bank's appetite for renewable energy financing
Abstract: The new Basel III regulations are likely to make long-term
financing more expensive, which will affect the financing of
capital-intensive renewable energy technologies, because they typically
rely on long-term financing. In addition, the capital and liquidity
requirements of Basel III are likely to limit the amount of capital
available for renewable energy financing from banks in the future.
Together, these are threats to renewable energy deployment because limited
financing may prevent the financing of some projects and because more
expensive loans are likely to make a number of projects uninteresting
financially. A potential solution is proposed here, which requires
financing capital-intensive energy projects, pooling these investments into
a portfolio and selling down the portfolio in tranches to various types of
investors. The benefit of this solution for banks is that it will allow
them to maintain the financing of capital intensive renewable energy
projects, while complying more easily with Basel III.
Keywords: Renewable energy financing; Basel III; capital-intensive energy projects; (follow links to similar papers)
JEL-Codes: Q00; Q20; Q40; (follow links to similar papers)
16 pages, October 17, 2013
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