The ability of renewable energy assets to attract private investment: factors and considerations that influence an investor's decision to invest into South African assets with a renewable energy exposure

Master Thesis


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University of Cape Town

This paper aims at facilitating, through research and increased understanding, the inflow of investments into renewable energy (RE) assets. The private sector represents vast pools of funding that is needed for RE capacity to be unlocked on a sustainable and large scale rate. Through using a grounded theory research design methodology, the drivers and restraints identified were the risks and rewards involved in investing into a RE asset, specifically the macro-economic and microeconomic risk and reward factors involved. Renewable energy assets were found to closely be affected by government policies and the stability thereof. Return attributes to renewable energy were a high cash yielding, long term in nature and inflation indexed payments - all attractive attributes to pension funds, the largest private investment group with regards to assets under management. Through the grounded theory methodology process a causal loop diagram (CLD) was built, representative of the insights of RE as an asset class- gained from the literature. One leveraging factor identified in the CLD to increase investment is government policy stability which will substantially decrease perceived risks to investors and facilitate in increased investments into renewable energy assets.