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Financing the transformation of the energy system in times of great instability of financial markets

Report of August 1, 2012

One of the most pressing public priorities in Germany at present is how to organize the transformation of the energy system. However, the cost of stabilizing the financial sector as well as the fiscal pact and the debt brake mean that the state has limited financial resources. Consequently, the availability of private capital, whether it is in the form of equity or debt, is becoming a decisive factor in the successful transformation of the German energy system. Recently, there have been more and more indications that banks are very reluctant to extend credit and are focusing on the potential risks of financing the switch to renewable energy. At the same time, however, the financial sector is also wrestling with political decisionmakers about the capital requirements of the loans concerned. Yet there can be no discussion about reducing the capital base in the banking sector. Instead, the government should also call for appropriate involvement of the major banks in financing the transformation of the energy system in return for implicit guarantees for those banks, just as financial aid from the state was linked to loans being granted to SMEs in 2008. At the same time, the risks have to be spread more widely. Know-how about and the financial strength of private equity funds may be of help here.

The complete publication in German by Claudia Kemfert and Dorothea Schäfer in: DIW Wochenbericht 31/2012 (PDF, 254.35 KB)