The effect of financial constraints on energy-climate scenarios

In this paper, we discuss the implications of financing constraints for future energy and climate scenarios. Aspirations to improve energy access and electrification rates in developing countries, while simultaneously reducing greenhouse gas emissions, can be seriously hindered by the availability of low-cost capital for the necessary investments. We first provide a brief description of the theoretical foundations for financing constraints in the energy sector. Then, using a broad range of alternate assumptions we introduce capital supply curves to an energy system model for Sub-Saharan Africa, with a specific focus on the power sector. Our results portray the effect of capital cost on technology selection in electricity generation, specifically how limited capital supply decreases investments to capital-intensive zero-emission technologies. As a direct consequence, the emission price required to meet given emission targets is considerably increased when compared to case that disregards the capital constraints. Finally, we discuss possible policy instruments for resolving the constraints.