Estimating the cost of capital for renewable energy projects

By Bjarne Steffen. Energy Economics, 2020

332 citations recorded by the source corpus.

Many models in energy economics assess the cost of alternative power generation technologies. As an input, the models require well-calibrated assumptions for the cost of capital or discount rates to be used, especially for renewable energy for which the cost of capital differs widely across countries and technologies. In this article, we review the spectrum of estimation methods for the private cost of capital for renewable energy projects and discuss appropriate use of the methods to yield unbiased results. We then evaluate the empirical evidence from 46 countries for the period 2009–2017. We find a globally consistent rank order among technologies, with the cost of capital increasing from solar PV to onshore wind to offshore wind power. On average, the cost of capital in developing countries is significantly higher than in industrialized countries, with large heterogeneity also within the groups of industrialized or developing countries.

Subfields: Economics and Econometrics, Finance, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/4b641d2a1659f6adc1f15d8ffa5464e492435343

Citations in the corpus

• High-resolution large-scale onshore wind energy assessments: A review of potential definitions, methodologies and future research needs (2021, neutral): “7% in Greece, whereas the data for offshore wind is sparse, but range from around 6% in Germany and Belgium to over 12% in Great Britain [187].”