Financial Costs (LCT & RES)

This section is concerned with the barriers that arise as a result of the relatively high costs of low carbon technologies and renewable energy sources. Coupled with a problematic access to capital, the costs of clean energy urban projects can often deter investors and ultimately block the initiation of projects. There are four specific barriers to low carbon technologies and renewable energy sources that fall under the category of financial costs:

High Upfront Costs

The initial costs associated with low carbon and renewable technologies are often higher than the upfront costs of projects that make use of more conventional energy sources. The opportunity costs created from replacing existing conventional power sources also build up a barrier to investments in renewables. This will continue to be the case as long as the existing energy infrastructure will continue to be operational.

Consequently, low carbon technologies are facing difficulties to become competitive, which ultimately prevents investment. The low investment rate in such technologies hampers diffusion, which creates a negative reinforcing effect by not allowing the creation of economies of scale. Preferential access to credit, for example, remains necessary in order to compensate for the large amount of sunk costs associated with low carbon and renewable technologies projects. 

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