Determinants of financing decisions for renewable energy projects: A case study

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Abstract

Renewable energy sources have never been more affordable and are now significantly undercutting fossil fuels as the world’s cheapest source of energy. Otherwise, it can benefit the environment, economy and society in the long term. However, financing and investment barriers play an important role in order to encourage renewable energy projects in Vietnam. In this research study on factors affecting investment decisions in renewable energy, along with behavioural and institutional theories, the authors have pointed out that financing decisions (FD) for energy projects in Vietnam are also influenced by non-financial factors. In this paper, we developed the model by using four factors: a priori beliefs (PB), institutional influence from legal obligations (IO), institutional influence from normative sources (IN), and knowledge of renewable energy operational context (KC). Structural equation modelling (SEM) is used to analyze determinants of the decision-making of financial institutions. Similar to Giang (2022), our result shows the important role of the PB in the effectiveness of renewable energy’s existing policies and technological adequacy, KC as well as the IN in renewable energy FD of institutional investors. Meanwhile, IO does not impact the investors’ willingness to finance renewable energy projects.

Keywords: Renewable Energy, Decision-Making, Financial Institution

Authors’ individual contribution: Conceptualization —T.T.T.D. and G.T.C.; Methodology — T.M.T. and H.D.L.; Software — T.T.T.D., T.M.T., and L.P.T.; Formal Analysis — T.T.T.D., L.P.T., and G.T.C.; Resources — T.M.T. and L.P.T.; Data Curation — T.T.T.D.; Writing — Original Draft — T.T.T.D. and H.D.L.; Writing — Review & Editing — T.T.T.D. and H.D.L.; Visualization — H.D.L. and G.T.C.; Supervision — T.T.T.D.; Project Administration — T.T.T.D.; Funding Acquisition — T.T.T.D.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G30, G32, G41, M10, 010, Q20

Received: 28.02.2024
Accepted: 08.10.2024
Published online: 11.10.2024

How to cite this paper: Do, T. T. T., Tran, T. M., Le, H. D., Tran, L. P., & Cao, G. T. (2024). Determinants of financing decisions for renewable energy projects: A case study. Risk Governance and Control: Financial Markets & Institutions, 14(4), 29–40. https://doi.org/10.22495/rgcv14i4p3