Investment decisions in the renewable energy field: An analysis of main determinants

Renewable energy technologies (RET) have the potential to satisfy a significant share of the global energy supply, thus contributing to achieve climate mitigation goals. RET can also accelerate the recovery from the current economic crisis thanks to the many environmental, economic and societal benefits that such technologies incorporate. However, traditional accounting methods largely overlook the positive externalities generated by RET and therefore tend to favor conventional energy sources over capital-intensive, alternative energy technologies. Even worse, RET still suffer from a series of biased perceptions and preconceptions that favor status quo energy production models over innovative alternatives. This perspective can help explain why investments in RET, although appealing, still remain below expectations. In order to better understand this phenomenon, we focus on the investment decision making process of a sample of investors with the objective to identify the main determinants of their choices. We propose and test a conceptual model which investigates the role of institutional and behavioural factors in determining the share of renewable energy technologies in the investment portfolios, as well as the degree of technological diversification of these portfolios. Based on the results of our analysis, we derive and discuss implications for scholars, investors, and policy makers.