Distributed ledger technology offers the potential to raise investments in small-scale renewable energy projects
To achieve the Sustainable Development Goals as well as the Paris Agreement, major investments in renewable energy production are necessary worldwide. In particular, decentralized, small-scale projects offer copious potential to create energy access as well as to contribute to an affordable, reliable, and sustainable energy supply system. In developing countries, such projects often have problems finding funding. Direct private investment tools like the community-based hometown investment trust fund address this issue and offer a way of financing for those projects. Technical developments in the sphere of distributed ledger technologies (DLTs) provide the opportunity to increase the fund’s transparency and thus improve its functioning. On that basis, we contribute to the literature in two ways: First, we delineate a concrete application of DLTs in the field of green financing, which offers the potential to increase social welfare. Second, the decision problem of investors is modeled, which illustrates through which channel the use of DLTs impacts the investors’ behavior.
Illustration Photo: Solar Panels (Public Domain from Pixabay.com)