How to finance the energy transition? Elements of an analysis for a strategic approach
While the trajectory and orientation of the “French-style” energy transition appears to be getting clarified over the course of parliamentary debates, the more specific issue of financing tools to implement investment projects on the ground still seems subject to several uncertainties. This study aims to contribute to the current reflection regarding a more integrated approach to financing issues: indeed, given the multiplication and rapid development in financing tools, it is important to take a step back and look at the larger picture, starting with an analysis of needs and of the specific characteristics of investments required for the energy transition.
- FINANCING IS AT THE CORE OF ENERGY TRANSITION PROJECTS
Market and regulatory signals are primary factors in the initiation of energy transition projects. However, financing tools represent a major challenge in facilitating their development. Two complementary challenges condition the scaling up of investments: mobilizing incremental sources of funding to respond to the needs identified, and reorienting a part of existing funding towards projects most beneficial for the transition.
- FINANCIAL CHALLENGES: A NEED FOR STRUCTURE
The study identifies three financing challenges key to assessing the coherence of tools from an overall perspective: intermediation via capital markets upstream in order to mobilize the necessary funding at least cost; calibrating downstream project financing mechanisms in order to respond to the needs of various actors and sectors, and to limit transaction costs; and the need to ensure better alignment between financial and regulatory tools with a view to harmonization and long-term visibility.
- A PUBLIC AGENCY TO COORDINATE TRANSITION FINANCING?
An analysis of the strengthening of governance must be at the heart of the development of a strategic approach to transition financing. Given the potential risks of increasing complexity due to the diversification of financial and regulatory tools, setting up a steering agency to ensure a coherent arrangement seems indispensable. Thus, the primary responsibility of a “transition-financing agency”, based on the model of KfW in Germany, would be to take on the role of the leader and coordinate all the tools deployed within a framework and shared objectives.