Private Equity Investment in Renewable Energy Infrastructure: Financing, Technology Costs, Investment Risk, and Regional Determinants

Abstract

The study investigated private equity and private investment in renewable energy infrastructure by considering investment size, financing structure, renewable energy technologies, regional investment patterns, and key drivers of investment decisions. The analysis used a descriptive approach across 8 stages to assess global Private Participation in Infrastructure (PPI) investment and the factors influencing renewable-energy investment. Results showed that in 2023, global PPI investment increased from USD 87.1 billion through 324 projects to USD 100.7 billion through 315 projects in 2024. The energy sector was the largest PPI sector, with USD 67.9 billion in 217 projects. Debt contributed 68% of PPI financing, and equity-like sources contributed 31%, with private equity accounting for around 30.6% of total PPI investment. Renewable energy remained a major focus of energy-sector investment, although the share of renewable electricity-generation projects supported by development finance institutions dropped from 56% in 2019 to 16% in 2024. East Asia and the Pacific topped the investment regionally with USD 56.959 billion, followed by Latin America and the Caribbean at USD 21.865 billion and Sub-Saharan Africa at USD 7.918 billion. Globally, development finance institutions participated in 34 per cent of PPI projects, compared with 64 per cent in Sub-Saharan Africa, 88 per cent in the Middle East and North Africa, and 82 per cent in Europe and Central Asia. Investment attractiveness was affected by technology costs, with solar photovoltaic and onshore wind having relatively competitive levelized costs of electricity. The results indicate that investment in renewable energy is co-determined by technology costs, financing conditions, revenue certainty, policy support, capital structure and investment risk. It is therefore imperative to strengthen risk-mitigation mechanisms and financing conditions to increase private equity participation in renewable-energy infrastructure.