#36 What Prevents The Adoption of Solar Energy? Dr. Nicholas Ryan on the Hold-up Problem

Solar power has become dramatically cheaper. So why is renewable energy still expanding much more slowly in some countries than in others? In this episode, I speak with Nicholas Ryan about his paper Holding Up Green Energy: Counterparty Risk in the Indian Solar Power Market. The paper studies a simple but important problem: investors may be reluctant to build solar projects if they are not confident that the buyer of the electricity will actually pay them. Using detailed auction data from India, Nick shows that riskier states pay substantially more for solar power. When those same states procure through the more creditworthy central government, the price gap largely disappears. We discuss: • the hold-up problem in renewable energy investment • why counterparty risk creates a solar risk premium • how India’s auction system provides a clean empirical test • why risky states pay around 17% more • how that premium is comparable to roughly two years of solar cost declines • why some firms can reduce risk through bargaining leverage • how price ceilings affect the amount of solar actually procured • why central-government intermediation can help de-risk investment • and whether similar institutions could help accelerate renewable deployment elsewhere A fascinating conversation on the interaction between institutions, finance, and the green energy transition. For questions, comments or suggestions, you can contact me at arvid.viaene.ce@gmail.com