PROBLEMS OF EFFECTIVE FUNCTIONING OF FINANCIAL INSTRUMENTS TO PROMOTE THE RENEWABLE ENERGY DEVELOPMENT

Abstract

The increasing urgency of climate action and energy transition demands substantial investments in renewable energy, especially in economies undergoing transformation. However, the effectiveness of financial instruments aimed at stimulating the development of renewable energy remains limited by a range of institutional, financial, and technical barriers. The purpose of this study is to identify and systematize key problems that hinder the efficient functioning of financial tools for renewable energy support, considering both international best practices and specific challenges in emerging markets. The relevance of the topic stems from the growing gap between the scale of required and actual investments in clean energy, particularly in developing countries, where investment flows remain insufficient. The research is based on a comprehensive theoretical analysis and comparative review of financial instruments, complemented by a classification of barriers and structured policy responses. The study applies a systemic approach to categorize financial tools into four main groups: direct public support, fiscal incentives, market-based mechanisms, and decentralized innovative models. It also outlines five key factors contributing to the effectiveness of these tools, including regulatory stability, risk mitigation mechanisms, institutional coordination, financing diversification, and public engagement. The results reveal that while a wide array of financial mechanisms exists, their performance varies significantly across different national contexts and depends on the maturity of regulatory frameworks, availability of risk-sharing instruments, and coordination among stakeholders. The classification of barriers by level (macro, meso, micro), origin (regulatory, financial, institutional, technical, informational), and stakeholder group (government, financial institutions, developers, consumers) offers a more nuanced understanding of inefficiencies in existing financing models. A systematization of proposed responses highlights regulatory reforms, concessional financing, guarantees, blended finance, and capacity building as critical to overcoming implementation challenges. Special attention is given to the context of Ukraine and transition economies, where policy instability, limited access to long-term local currency finance, and weak institutional capacity exacerbate existing barriers.