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Financing Energy Transition with Real Estate Wealth

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  • Jussi Vimpari

    (Department of Built Environment, Aalto University, P.O. Box 11000, FI-00076 Aalto, Finland)

Abstract
Transition to a low carbon energy system requires extensive private investment and novel financing instruments. Corporate power purchase agreements (PPAs) have been proven effective in increasing renewables financing. The challenge is to scale this corporate model to smaller energy consumers that form a significant part of the global total energy demand and carbon dioxide emissions. This paper examines collateral strength and global potential of the real estate sector as an offtaker for PPAs. The strength is evaluated by constructing a detailed energy and economic model for 90,000 buildings in the Helsinki Metropolitan Area (HMA), Finland. The global potential is evaluated by creating country-level profiles with global data of interest rates, energy consumption, and energy costs. The results suggest that real estate is a strong offtaker as the HMA’s value of real estate collateral compared to required wind power capital expenditures (that could cover electricity demand of the buildings) is approximately 100:1, and for cash flows, the ratio is 70:1 between gross rents and PPA costs. Analysis of global data suggests that the majority of buildings’ energy consumption in OECD countries as well as a large part of China’s energy consumption could fall into low access finance under the presented concept.

Suggested Citation

  • Jussi Vimpari, 2020. "Financing Energy Transition with Real Estate Wealth," Energies, MDPI, vol. 13(17), pages 1-10, August.
    • Handle: RePEc:gam:jeners:v:13:y:2020:i:17:p:4289-:d:401049
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    References listed on IDEAS

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    2. Ruslan Kostyrko & Tetiana Kosova & Lidiia Kostyrko & Liudmyla Zaitseva & Oleksandr Melnychenko, 2021. "Ukrainian Market of Electrical Energy: Reforming, Financing, Innovative Investment, Efficiency Analysis, and Audit," Energies, MDPI, vol. 14(16), pages 1-17, August.
    3. Jose Barroco & Peerapat Vithayasrichareon, 2023. "Accelerating the Energy Transition through Power Purchase Agreement Design: A Philippines Off-Grid Case Study," Energies, MDPI, vol. 16(18), pages 1-26, September.
    4. Rahmani, Amir & Mashayekh, Javad & Aboojafari, Roohallah & Bonyadi Naeini, Ali, 2023. "Determinants of households' intention for investment in renewable energy projects," Renewable Energy, Elsevier, vol. 205(C), pages 823-837.

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