Professor from Weseda University, Tokyo, Gives Green Energy Talk to ISET Community
Thursday, 13 September, 2018

On September 13, ISET hosted Farhad Taghizaden-Sesary, Professor of Economics at Waseda University, Tokyo, and Senior Assistant to the Dean of Asian Development Bank Institute. Dr. Taghizaden-Sesary delivered a lecture entitled Green Energy Finances.

The main obstacle to the development of renewable energy projects is the lack of access to financial resources. Investors often consider renewable energy projects as risky investments; in addition, according to Dr. Taghizaden-Sesary, most investments in renewable energy are characterized by a low Internal Rate of Return.

During the presentation, Dr. Taghizaden-Sesary discussed some methods that could be used to promote investments in green energy. To finance large long-term projects, bank loans should be replaced by long-term investments from institutional investors (such as insurance or pension funds), whose investment horizon and ability to tap into a vast amount of long-term savings are more compatible with this type of investment.

Another option is to increase the Internal Rate of return on renewable energy investments by utilizing resources coming from the (positive) spillover effects of such projects on tax revenues. Excess tax revenues collected due to the realization of the projects are (in part or total) transferred to the investors, thereby increasing the rate of return of green energy projects.

For smaller-sized projects, the suggestion is to introduce a new way to finance risky projects, which has experienced some success in Japan in the form of the Hometown Investment Trust Funds (HIT). The main objective of the HIT fund is to connect local investors with projects to be implemented in their own vicinities. In addition to receiving monetary returns, investors gain non-monetary benefits associated with the realization of the projects. Individual investors choose their preferred projects and make investments via the internet through a platform set up by specialized licensed companies. Through these trust funds, many Japanese people have already been able to contribute – with small payments – to the collection of significant amounts of money later used for the construction of green energy projects.