Financing Energy Transition with Real Estate Wealth

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Journal Title
Journal ISSN
Volume Title
A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä
Date
2020-09
Major/Subject
Mcode
Degree programme
Language
en
Pages
10
Series
Energies, Volume 13, issue 17
Abstract
Transition to a low carbon energy system requires extensive private investment and novel financing instruments. Corporate power purchase agreements (PPAs) have been proven effective in increasing renewables financing. The challenge is to scale this corporate model to smaller energy consumers that form a significant part of the global total energy demand and carbon dioxide emissions. This paper examines collateral strength and global potential of the real estate sector as an offtaker for PPAs. The strength is evaluated by constructing a detailed energy and economic model for 90,000 buildings in the Helsinki Metropolitan Area (HMA), Finland. The global potential is evaluated by creating country-level profiles with global data of interest rates, energy consumption, and energy costs. The results suggest that real estate is a strong offtaker as the HMA’s value of real estate collateral compared to required wind power capital expenditures (that could cover electricity demand of the buildings) is approximately 100:1, and for cash flows, the ratio is 70:1 between gross rents and PPA costs. Analysis of global data suggests that the majority of buildings’ energy consumption in OECD countries as well as a large part of China’s energy consumption could fall into low access finance under the presented concept.
Description
Keywords
Energy transition, Finance, Investment, Power purchase agreement, PPA, Real estate, Renewables
Other note
Citation
Vimpari , J 2020 , ' Financing Energy Transition with Real Estate Wealth ' , Energies , vol. 13 , no. 17 , 4289 . https://doi.org/10.3390/en13174289