What would it take to make renewable energy policy a success? To begin, policy needs to encourage enough investment at an appropriate financial cost. Policy can then set the conditions under which investment decisions are made, and these decisions determine whether policy objectives are met and at what cost.
In this new paper, CPI studied six large-scale renewable electricity generation projects in the United States and Europe to evaluate how policy affects project economics, as well as the cost and availability of financing.
The results of our analysis suggest that:
- The renewable energy projects studied would not have attracted investors without the help of policy support.
- In general, the financing and project costs that we identified are in line with published benchmarks for renewable projects.
- The duration of revenue support has the largest impact on financing costs.
- Revenue uncertainty is the second most important factor influencing financing costs.
- Investors’ perceptions of risk also significantly impact the financing costs of projects.
The ultimate goal of this analysis is to draw lessons that can be used to help policymakers design policies that help reduce the cost of financing for renewable energy.