Clean Energy Projects Struggle to Attract Funding Despite 90% Cheaper Costs

It is widely acknowledged that the world needs to reduce its dependence on fossil fuels and transition to cleaner, renewable energy sources. Governments have pledged to achieve net-zero greenhouse emissions in the near future, but it remains uncertain whether these pledges can be fulfilled using existing economic models.

Many economists and policymakers view the clean energy transition as a matter of cost. They believe that by reducing the costs of cleaner energy sources, renewables will eventually surpass fossil fuels and drive a natural transition. This perspective has led to efforts by governments and industries to lower the costs of clean energy, particularly solar and wind power, which have become more affordable over the past few decades. This is especially true in China, where government subsidies have helped scale up green industries and reduce the "levelized cost of energy" (LCOE). This metric indicates that clean energy sources were more affordable than fossil fuels, even before events like the Ukraine conflict caused oil and gas prices to surge.

Despite clean energy now being cheaper than fossil fuels, the global transition to renewable energy sources has not materialized as hoped. Clean energy is still used as a supplement to fossil fuels, and governments in both developed and developing nations continue to increase fossil fuel production and seek new reserves.

Some attribute the lack of progress in the clean energy transition to politicians like Donald Trump, who has long denied the impact of climate change. However, the real reasons are more complex and rooted in the economics of clean energy. According to Brett Christophers, author of "The Price is Wrong: Why Capitalism Won’t Save the Planet," one of the problems is that while renewable energy may be cheaper, it is not as profitable as fossil fuels. Additionally, the nature of electricity demand makes it unsuitable for market forces to govern the price of renewable energy, resulting in suboptimal outcomes for investors in energy infrastructure.

The unique characteristics of renewable energy present significant challenges for the transition to clean energy. The supply of wind and solar power is intermittent, leading to fluctuations in energy output and volatile prices. Government subsidies for green energy sources often result in overcapacity during periods of lower demand, and the withdrawal of subsidies disincentivizes investment in the sector.

As countries like the U.K. and Germany increase their consumption of renewable energy, their supply becomes more unpredictable, increasing reliance on fossil fuels during times when the sun doesn’t shine and the wind isn’t blowing. To move beyond fossil fuels, the clean energy sector needs reliable storage solutions for excess power generated during peak production times. Currently, pumped-storage hydro and battery storage are the primary methods, but both have limitations. Battery storage, in particular, remains prohibitively expensive. According to research by MIT, the price of battery storage would need to decrease by 90% for renewable energy sources to replace fossil fuels, which is unlikely to happen soon.

The intermittent supply of renewables makes clean energy projects less attractive to investors, making it harder to secure funding for these initiatives and further hindering the transition away from fossil fuels. This was evident with the Glasgow Alliance for Net Zero, which was launched in April 2021 with great fanfare but has since seen the withdrawal of the six largest U.S. banks, seriously undermining its prospects.

Unless clean energy projects can attract sufficient funding, the world will remain dependent on fossil fuels for the foreseeable future. However, these projects remain unattractive to traditional investors. Promises of taking action on climate change and achieving net-zero have become common among global corporations, but most continue to prioritize profitability above all else. For large-scale clean energy projects to secure the financial backing they need, they must demonstrate not only economic viability but also greater profitability than traditional energy sources. Alternatively, they need to attract a different class of investors.

Surprisingly, this latter option might be feasible. While some investors are driven by profit, many are willing to back good causes with their own money, especially if they can earn a profit. EcoYield Energy, a startup founded in 2024, aims to decentralize the funding of clean energy projects, making them transparent and accessible to anyone interested in building a greener world. The project seeks to move the clean energy industry beyond private equity and slow-moving institutions, enabling regular people to fund various solar-, wind-, and battery-powered energy projects in return for regular, verifiable on-chain yield.

EcoYield "tokenizes" the revenue from renewable energy sources and returns this money to investors in the form of stablecoins and ETH, while enabling community governance through a decentralized autonomous organization (DAO). Investors "stake" their USDC or fiat funds into the EcoYield protocol, which are then aggregated and distributed across verified, real-world projects, providing them with the capital needed to build out their infrastructure. The tokenized revenue, or yield, is returned to stakers each month.

Although it is still a new initiative, EcoYield is already backing three real-world projects, including a 100kW Rooftop Solar Project in Hull, U.K., which offers investors estimated returns of around 25% APY. It is also backing a 30kW Hydro Turbine project in North Yorkshire, U.K., and a 994kW Solar PV and 1MW/2MWh Battery Energy Storage System (BESS) project in Lancaster, U.K. Each of these projects has long-term Power Purchase Agreements in place and fixed-income contracts, ensuring stable returns backed by real infrastructure.

EcoYield also caters to investors primarily motivated by environmental concerns. With its transparent tracking system, investors can see the carbon offsets they’ve contributed to in real-time, understanding the impact of their investment in clean energy. EcoYield believes that the future of the clean energy industry lies in decentralized investment, opening the doors to a new class of investors who prioritize environmental factors over profits.