Global investment in new renewable energy capacity, including power and fuels (but not including hydropower projects larger than 50 MW) totalled USD 282.2 billion in 2019, up 1% over 2018.1In the first half of 2020, global investment in new renewable energy capacity rose 5% relative to the first half of 2019, suggesting sustained growth despite the COVID-19 pandemic.2 Some of this investment occurred in city-related projects – by municipal governments as well as other residential, commercial and industrial actors within cities – but the exact amount is unknown. Although data are becoming more available, no comprehensive dataset on renewable energy investment in cities by sector exists.

This chapter explores financing and investment in cities, including the provision of funding for renewable energy projects and the process of investing in projects to turn a profit. The discussion examines common financing mechanisms applied by cities worldwide and how these mechanisms are being used to support renewables across the world’s regions. The chapter concludes with an overview of the challenges that cities face in investment and finance of renewable energy projects.

Each city operates within a distinctive framework that affects the amount and type of renewable energy financing and investment available. Variables include the policies and regulations that govern city actions, the nature of relationships with higher levels of governments, partnerships with the private sector, ownership rights of the electric grid, etc.


Municipal governments are responsible for only a small share of the total financing that occurs within a city; in contrast, private individuals and companies account for far more of the investment in city-related projects – whether in the energy, buildings, commercial or industrial sectors – and have their own priorities, planning horizons and funding constraints. The total finance package allocated to renewables therefore results from many different players, regulations, institutions and financing mechanisms and is specific to every city.

Financing for renewables also must be tailored to meet the unique characteristics of each end-use sector: power, heating and cooling, and transport. In the power sector, municipal governments and other urban actors generally target renewable energy projects in two main categories: small-scale, on-site generating capacity (for example, rooftop solar PV on single buildings or on somewhat larger areas such as parking or waste sites), and larger-scale projects (for example, solar PV or wind farms) that often are located outside of geographical city limits.

Warsaw, Poland

In the heating and cooling sector, cities often target district heating networks. Different ownership models for these networks affect the allocation of financing and include, for example, municipal ownership, long-term concession agreements with private operators and “unbundled” networks with private ownership. The networks can be fed by large-scale heat pumpsi, municipal waste incineration, biomass boilers, industrial waste recovery, solar thermal and geothermal energy, although the share of renewables across these options can vary.3


Each city operates within a

distinctive framework

that affects the amount and type of renewable energy financing and investment available.

In the transport sector, cities working towards climate mitigation goals typically target projects related to mass public transit and zero-emission vehicles (including electric vehicles), which enables renewable electricity to replace fossil fuels in some transport applications (particularly through smart chargingii).4

iAlthough heat pumps are not renewable energy technologies in themselves, they may be viewed as enabling technologies because they can be powered by renewable electricity.i

iiSee Glossary for definition.ii


Using Own Available Capital or Assets

Raising Funds from External Sources

Municipal and Green Bonds

Development Finance

Leveraging External Funds

Public-Private Partnerships

Green Banks

Power Purchase Agreements





Africa and the Middle East

Latin America



North America