Abstract
Theoretically, the urgent need to transition away from fossil fuel power would present significant opportunities to invest in low-carbon projects. Yet despite this appeal, there remains a sizeable shortfall of low-carbon investment to meet the global climate targets. This investment gap is a clear indication that there are barriers which limit the capital flow into low-carbon projects. This study aims to explore the relative importance and the relationship of barriers for low-carbon investment that come from multiple scales (i.e., policy-, market-, and firm-level). The study relied on mixed-method approach consisting of questionnaire and case studies. The questionnaire data analysis measures the perceived importance of low-carbon investment barriers among different types of organisations (e.g., financier, project developer, government) across Asia Pacific countries. The analysis provides a starting point for investigating the relationship of these barriers through the case studies of geothermal power project development in Indonesia and New Zealand. Key findings from the questionnaire data analysis reveal differences in how government versus financiers and project developers perceive barriers to low-carbon investment. Financiers and project developers in the sample placed a high importance on barriers that would affect the project risk-return profile (e.g., policy uncertainty, volatile energy prices, investment risk). Meanwhile, government respondents view volatile energy prices and investment risk as less important. These observable differences represent a gap in understanding investment decision-making processes at the firm-level (i.e., financier and project developer). The economic literatures suggest that the degree of competition and state participation should have a large effect on stimulating capital flow into low-carbon projects. Key findings from the case studies, however, reveal inconsistency with this conceptualisation. Interviews with project developers reveal that institutional arrangements that fully embrace low-carbon power expansion are more significant than the relative role of the market or the state in stimulating investment. In both case studies, Power Purchase Agreement (PPA) is a major barrier for geothermal projects. This barrier emerges from the monopoly of power retailer(s) in which government is the major shareholder and their reluctance to enter into PPA with new entrants. In the context of energy transition, addressing how project developers and financiers perceive barriers to low-carbon investment is an important perspective for devising more strategic interventions for low-carbon power capacity expansion.