Kothari, Sumit; (2025) The Financial Complexity of Low-Carbon Transition: Examining the Growth in Solar Energy. Doctoral thesis (Ph.D), UCL (University College London).

Text PhD Thesis SK FINAL.pdf - Accepted Version Access restricted to UCL open access staff until 1 February 2026. Download (35MB)

Abstract

A significant acceleration is required in the pace of low-carbon technology deployment across the energy sector to reduce the sizeable emissions gap to 1.5°C pathways. This requires more than a tripling of renewable energy capacity by 2030 and large investments in mainstream and emerging technologies. Appropriate low-cost capital is needed from the financial markets at different stages of technology and sector development across different countries with diverse investment contexts. The financial markets, in turn, need energy technologies and markets to evolve towards structures that makes renewable energy projects suitable for investments. Integrated and adaptive policies are therefore needed to manage the systemic transformation of the energy sector, the emergence of low-carbon industries and the alignment of financial market structures that can deploy renewable energy and low-carbon infrastructure at scale. Complex multi-system transformations require similar systems-based theories to understand the growth of renewable energy technologies and reveal the structure and dynamics within financial systems that power growth. This thesis investigates the role that the investment system plays in scaling renewable energy across different country contexts. It uses a complexity framework in understanding the growth of renewable energy technologies as an emergent property of adaptive investment markets that mobilise finance for renewable energy projects through the collective actions of heterogeneous investors in a dynamic investment environment. Through a quantitative analysis of empirical investment and cost data for solar energy, it provides a rich understanding of the actors, relationships, dynamical processes and enabling investment environments that characterise the investment system. Financial ecology differs across countries based on their level of economic development and the maturity of the solar sector in the country. The role of actors at different stages of the technology’s growth and in different country contexts indicates their preferences and capacities. Co-investments occur across the capital structure of projects and define relationships within the investment system. Leverage and influence characterise these co-investment relationships and provide insight into the pattern of relationships driving the growth of solar energy. At the same time, investment environments are inherently complex – financial, economic, governance and policy elements create a macro system of incentives. A systemic approach to investment risks goes beyond an additive and linear understanding of these risks in the investment environment to one with non-linearity in market responses to joint configurations of risk. Coevolutionary links exist between innovation and financing dynamics that indicate the presence of a positive feedback loop where project costs are intricately linked with the availability and cost of financial capital.

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