Mapped cost of capital for renewable energy investments across the EU
This article originally appeared in Ecofys and is republished with permission.
The weighted cost of capital varies significantly across the European Union, amounting to 3.5% in Germany and 12% in Greece in 2014. For the first time, a research has estimated the costs of capital for onshore wind energy projects across the 28 EU Member States. The research was led by Ecofys and performed together with Fraunhofer ISI, eclareon and EPU-NTUA as part of the ‘Diacore project’, funded by the Executive Agency for Small and Medium Enterprises (EASME).
Based on interviews with more than 110 banks and project developers in the EU, the consortium finds that next to the generic country risk, the main risk for investors in renewable energy is the policy- induced risk, hence the design and the reliability of renewable energy support. Unstable policies, such as sudden retroactive changes, automatically increase the cost of reaching renewable energy targets.
Calculations based on the Green X Model show that if all countries would have the same renewable energy policy risk profile as the best in class, the EU Member States could reduce the policy costs for wind onshore by more than 15%. A reduced country risk could lead to greater savings.
Final Report: The impact of risks in renewable energy investments and the role of smart policies
