The answer to who holds the largest share of investments is corporations. However, households and governments also play a crucial role in this regard. Specifically, households have significantly increased their participation since 2015, particularly through the use of solar panels, energy efficiency measures, heat pumps, electric vehicles, and more. On the other hand, the governments support such investments through measures such as tax incentives.
According to a new report by the International Energy Agency (IEA), the capital structure of investments in the global energy sector has remained stable since 2015. The report addresses the relationship between debt and equity in financing this sector.
Currently, debt accounts for about 46 per cent of total costs, while equity makes up about 54 per cent. To clarify, debt represents the portion of money borrowed, for example, from banks. On the other hand, equity, as the word itself suggests, represents the investor’s own capital.
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However, debt is not the same for all energy sources. For instance, national oil companies rely less on borrowing compared to their competitors, with the percentage of debt being about 35 per cent of total investments.
As the report states, high energy prices following the COVID-19 pandemic and events in Ukraine have enabled fossil fuel companies to reduce their debt levels in recent years.
In contrast, clean energy, such as wind or solar power, requires higher initial costs, resulting in debt financing comprising about 50 per cent.
Another interesting example is new technologies such as battery storage or hydrogen supply. Their debt share is significantly lower, at around 20 per cent. The reason for this lies in the fact that these technologies are associated with higher risks. Consequently, development teams rely less on borrowing and instead seek to secure finances through venture capital. To clarify, these are investors who specialize in risky investments. They aim to invest in new technologies that carry risk but also offer the potential for significant success.
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