Green Sukuk to finance solar energy projects: an application in Turkey

Purpose The purpose of this research is to investigate the feasibility of Green Sukuk as the main financing tool to finance solar energy projects in the example of Turkey. The study is relevant because financing remains a critical barrier to expanding renewable energy in emerging markets, and Green Sukuk can offer a Sharia-compliant, sustainable alternative to conventional funding. The findings of the case study shall aim to act as a guideline for investors and policymakers who wish to adopt Green Sukuk in their financing scheme. Design/methodology/approach Application of a case study simulated in Turkey as part of a governmental auction for a solar power plant that is financed by Green Sukuk and evaluated using capital budgeting techniques. Two scenarios of different inflation rates as a risk mitigation technique were used for the project. Findings Findings indicate the net present value as positive, and the internal rate of return more than the discount rate when simulated with a range of electricity prices below the cap price of the tender. This demonstrates that Green Sukuk financing can effectively support solar energy development in Turkey, potentially attracting more investors to the sector. Originality/value While previous studies primarily rely on qualitative analysis, this study provides the first quantitative evaluation of Green Sukuk as a financing tool for a Turkish solar project, filling a clear research gap and offering practical insights for policymakers and investors.