The cost of capital is a key lever in the real economy, due to its ability to influence capital flows and investment decisions. This report seeks to understand how financing costs across different energy technologies and markets has changed over the last twenty years. It forms the first output of the Energy Transition Risk and Cost of Capital Project (ETRC) initiated by the Oxford Sustainable Finance Programme.
In addition to tracking changes in the cost of capital across the energy sector, over multiple years ETRC will seek to understand what is driving changes in the cost of capital, for example, between fossil fuels and renewable energy; what is impeding or enabling the pricing of energy transition risk, for example, data availability and regulation; and how the changing cost of capital will impact companies and providers of finance and investment, for example, through changing the economic and financial returns available across the energy sector. Research in these areas is essential for, among other things, identifying transformational interventions that can shift capital flows towards clean energy and away from dirty energy. It will also provide insights for shifting capital flows in other sectors of the global economy as part of the net zero carbon transition.