Cost of capital: the real price of green energy
Channel: UNU-WIDER
Date: 02/07/2013

Despite massive potential investments, green energy is not up to speed in Africa. The reason is not the cost or durability of the technology but a financial factor—the cost of capital.

Says Yannick Glemarec, Executive Co-ordinator at the Multi-Partner Trust Fund Office in New York: 'The main issue for renewable energy is not so much the cost of the technology, but the cost of financing that technology. If you invest one million dollars at five per cent interest rate you have to reimburse 1.5 million dollars; if you invest one million dollars at twelve per cent you have to reinvest three million dollars.'

Interest rates are much higher in developing countries compared with Europe, which is a reflection of the risk perception in capital markets.

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