Navigating the green energy labyrinth and solving the Developer's Dilemma. How local governments must balance uncertainty and investment attraction.
- Jesper Bork Petersen
- Sep 29, 2024
- 4 min read
Updated: Apr 18, 2025
Imagine standing at the edge of a maze, where each turn leads to a sustainable energy future or a dead end. This is the Developer's Dilemma in the green energy transition - a high-stakes game where certainty and investment willingness dance in tandem. Are you ready to find the path through?
KRISCON / 2024
Authored by: Jesper Bork Petersen and Mads Prange Kristiansen
Executive Summary
Figure 1 offers a global perspective on renewable energy adoption. As of 2021, we see a diverse landscape of progress: a select few countries have surpassed the 50% mark in renewable energy share, while nearly 30 nations have pushed beyond 25%. However, half the world's nations remain below 10%.
Rather than viewing this as a shortfall, we see it as a canvas of opportunity. Each percentage point represents growth, innovation, and sustainable development potential.
What keeps us from pushing toward the 75% or 100% mark? And what is keeping the balance half of the world's countries from getting out of the starting block? It is the interplay between the certainty and investment willingness: together a maze of great complexity, and an impossible one to get through when uncertainty is too high.
Detailing the components, or corners in the labyrinth if you wish, towards Final Investment Decision (FID) is no easy task. We explode the main elements here. Each one a maze itself, we are dealing with complexity squared. Not for the faint of hearts.
Why uncertainty and investment attraction matters
In the face of climate change, the urgency for a green energy transition is pressing. Local governments worldwide find themselves at the forefront of this monumental shift, tasked with implementing sustainable energy solutions while navigating a labyrinth of challenges. From policy uncertainties to technical hurdles, the path to a green energy future is fraught with complexities.
At the heart of these complexities lies what we at KRISCON call the "Developer's Dilemma." The concept encapsulates the delicate balance between certainty and the willingness to invest capital and development expenses in green energy projects. As certainty increases, so does the willingness to invest - but the journey is far from linear.
Our years of experience have provided us with unique insights into this dilemma. We have witnessed firsthand how local governments grapple with pressing questions: How can they create policies that attract investment while ensuring sustainable development? What strategies can be employed to streamline the transition process? How can the needs of the community be balanced with the interests of investors and the demands of green energy development?
These are not theoretical inquiries; they are practical challenges that shape the future of our communities and our planet.
The Developer's Dilemma is not just a concept; it's a real-world obstacle that stands between our current energy landscape and a sustainable future.
In this article, we take you on a journey through the green energy labyrinth. We'll explore the intricacies of the Developer's Dilemma, unpack the challenges at each stage of green energy project development, and offer strategies for overcoming these hurdles. Drawing from our extensive experience and case studies, we'll provide a roadmap for local governments to navigate this complex terrain.
The Developer's Dilemma Unveiled
At the heart of the green energy transition lies a paradox we call the "Developer's Dilemma." This concept is crucial for understanding the challenges faced by both investors and local governments in implementing renewable energy projects.
The Balancing Act: Certainty vs. Investment Willingness
The Developer's Dilemma is best understood as an interaction between two key factors: certainty, the level of assurance about the project's viability, regulatory support, and potential returns and Investment Willingness, the readiness to commit capital and development expenses to the project.
As illustrated in our graph, these two factors are linked, but their relationship is anything but simple. We are sometimes asked "What does a developer do?". In a nutshell, they manage this relationship.
The Non-Linear Dance of Certainty and Investment Willingness
The journey from an initial concept to a fully operational green energy project is multifaceted and fraught with challenges. While we can anticipate that obstacles will arise at each stage, their exact nature often remains unpredictable until we're deep into the process. Let's break down these stages:
Government Plans: The journey begins with governmental initiatives, setting the stage but offering limited certainty.
Feasibility License: A crucial early step, providing a slight boost in certainty and investment willingness.
Surveys and Analysis: Detailed studies increase understanding but may reveal new challenges.
Understanding of Subsidies: Clarity on financial support significantly boost investment certainty.
Commercial Licenses: A major milestone substantially increasing both certainty and investment willingness.
Supply Chain Established: Building the necessary infrastructure cements the project's viability.
Projects in Operation: The first operational projects provide real-world data and experience.
Industry Established: The final stage, where certainty and investment willingness reach their peak.
The Nature of Progress
The zigzag lines in our graph represent the volatile nature of this journey. Each stage comes with its own set of challenges and potential setbacks. A change in government policy, an unexpected technical hurdle, or shifts in the global energy market can all cause sudden drops in certainty, temporarily decreasing investment willingness.
Risk Assessment at Every Turn
For developers and local governments alike, each stage requires careful risk assessment. The key questions at every turn are whether there is enough certainty to justify moving to the next stage? What potential risks could derail progress? How can we mitigate these risks to maintain investor confidence?
The Role of Local Governments
Local governments play a crucial role in navigating the Developer's Dilemma. By understanding this concept, they can create policies that provide the necessary certainty to attract investment to the benefit of their economy. They can anticipate and address potential roadblocks at each stage before they cause delays. And they may foster an environment that supports the entire journey from initial plans to a fully established green energy industry.
Understanding the Developer's Dilemma is the first step in successfully navigating the green energy transition. It provides a framework for anticipating challenges, managing risks, and creating strategies that align the interests of developers, investors, and the community at large.
Part two is in the press
KRISCON is unfolding each of the steps during the Developers Dilemma ladder. Sign up below to be notified once we publist it here.
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