Relative significance of determinants of foreign direct investment in wind and solar energy in developing countries – AHP analysis. (December 2018)

• Record Type: Journal Article
• Authors: Keeley, Alexander Ryota; Matsumoto, Ken'ichi
• Is Part Of: Energy policy. Volume 123(2018)
• Page Start: 337
• Page End: 348
• Publication Date: 2018-12
• Subjects: Wind energy -- Solar energy -- AHP -- Foreign direct investment -- Determinant -- Policy intervention; Energy policy -- Periodicals; Politique énergétique -- Périodiques; Electronic journals; 333.79
• DOI: 10.1016/j.enpol.2018.08.055
• Languages: English
• ISSNs: 0301-4215

Abstract

Abstract: The importance of foreign direct investment (FDI) for the development of renewable energy in developing countries has been increasingly recognized. Numerous countries have created various measures to attract FDI in the renewable energy sector. This paper uses the analytical hierarch process to clarify the relative significance of the determinants in the location decisions of foreign wind and solar energy investors. A total of 18 determinants that are categorized into the macroeconomic environment, institutional environment, natural conditions, and renewable energy policy categories are used for the analysis. The results show that adding to the traditional determinants of FDI, including the macroeconomic environment, the institutional environment, and natural conditions, renewable energy support policies have the same or stronger influence as location determinants of FDI. The paper also points out that some of the traditional determinants, such as exchange rate volatility, access to land, and an efficient and transparent administrative procedure, are also very important as determinants of FDI in wind and solar energy. Policy implications focus on the determinants of FDI in wind and solar energy. The relative significance of the determinants clarified through this study offers criteria for prioritizing policies and actions for policy makers. Highlights: Relative importance of the determinants of FDI in wind and solar energy are clarified. Expert opinions are analyzed using analytical hierarchy process. Renewable policies hold strong influence when compared to traditional determinants. Renewable policies need to be designed to reduce exchange rate volatility risk. Creating one-stop agency is recommended for efficient administrative procedure.