Renewable energy financing by state investment banks: Evidence from OECD countries

Abstract

While governments increasingly employ state investment banks (SIBs) to finance renewable energy projects, whether these institutions’ actual behavior aligns with expectations remains uncertain. Here, we assess the predictors of SIB involvement in renewable energy deals in OECD countries using a fixed-effects logit model. Our results show greater SIB involvement in higher-risk technologies such as offshore wind and biomass but decreased activity once domestic markets for solar photovoltaics mature. Contrary to what the literature suggests, however, SIBs show no increased involvement in first projects using novel technology, unlike other public-sector lenders, and less involvement in smaller renewable energy deals. The evidence on whether SIBs mobilize private sector lenders or crowd them out favors the former but remains equivocal. We conclude by discussing the implications for policymakers regarding the mandates and guidelines for SIBs.