Description
There is a range of innovative solutions in which agreements between two or more parties enable upfront costs to be overcome by taking on the costs and risk associated with specific components such as batteries via leasing models and third-party ownership models while the rest of an item such as a bus, is purchased outright by the project developer.
Instrument category
Leasing and asset finance models
Implementation status
Low - limited evidence available
Enabling conditions and success factors
- Well developed market dynamics such that different parties involved can implement robust contractual arrangements and fall back on legal recourse if necessary.
Instrument benefits
- Overcomes high upfront costs that are often a barrier to progress.
- Transfer of risk of maintaining the asset to the manufacturer.
Challenges and risks to implementation
- As the technology of relevant assets such as batteries or solar panels evolves, there could be challenges related to performance and lease agreement terms.
- Second use of assets such as batteries, beyond the terms of the first leasing agreement, is yet to be proven and could be a disincentive to recycling or reuse, which are important circular economy objectives.
