Determinants of venture capital and private equity investments in renewable energy: A cross-country study

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Economics from the NOVA – School of Business and Economics

This paper conducts the first econometric analysis of determinants of greentech venture capital (VC) and private equity (PE) investments into renewable energy technology. Renewables are an industry which is still in development. The underlying technologies need to mature to eventually benefit from cost savings due to scale and learning effects. The required funding for energy technology is mainly provided by VC and PE investors. The results suggest that the investment volume can be further increased, if governments ensure a stable investment process from the entrance (eased by a solid R&D base which is funded by governments) to the exit (facilitated by ensuring a stable demand, for example through a CO2 tax or cap). The study further found, that investors are more concerned about the economic situation at the time of disinvestment, rather than the current state. Empirical evidence shows that the growth rate of the real interest rate, the oil price growth and population growth are significant indicators for investment volumes and stable across different setups, while the absolute value is not always.