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Impact of Renewable Energy Act Reform on Wind Project Finance

Author

Listed:
  • Matthew Tisdale
  • Thilo Grau
  • Karsten Neuhoff

Abstract

The 2014 reform of the German Renewable Energy Act introduces a mandatory shift from a fixed feed-in tariff to a floating premium system. This is envisaged to create additional incentives for project developers, but also impacts revenues and costs for new investments in wind generation. Thus uncertainties for example about balancing costs and the impact of the location specific generation profile on the average price received by a wind project are allocated to renewable projects. We first estimate the magnitude of the impacts on wind projects based on historic and cross-country comparison. We then apply a cash-flow model for project finance to illustrate to what extent the impact of the uncertainty for project investors reduces the scale of debt that can be accessed by projects and thus increases financing costs.

Suggested Citation

  • Matthew Tisdale & Thilo Grau & Karsten Neuhoff, 2014. "Impact of Renewable Energy Act Reform on Wind Project Finance," Discussion Papers of DIW Berlin 1387, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp1387
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.466289.de/dp1387.pdf
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    References listed on IDEAS

    as
    1. Thilo Grau, 2014. "Comparison of Feed-in Tariffs and Tenders to Remunerate Solar Power Generation," Discussion Papers of DIW Berlin 1363, DIW Berlin, German Institute for Economic Research.
    2. Giebel, Olaf & Breitschopf, Barbara, 2011. "The impact of policy elements on the financing costs of RE investment: The case of wind power in Germany," Working Papers "Sustainability and Innovation" S11/2011, Fraunhofer Institute for Systems and Innovation Research (ISI).
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    Citations

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    Cited by:

    1. Karsten Neuhoff & Sophia Rüster & Sebastian Schwenen, 2015. "Power Market Design beyond 2020: Time to Revisit Key Elements?," Discussion Papers of DIW Berlin 1456, DIW Berlin, German Institute for Economic Research.
    2. Lorenc Malka & Elena Bebi & Majlinda Alcani & Ilirian Konomi & Pietro Bartocci & Evis Berberi & Matilda Shehu(Tola) & Ardit Gjeta & Ermonela Rrapaj, 2021. "The Future Strategies of the Wind Power Development in Albania: Case Study: Qafe Thane, Pogradec, Albania," International Journal of Energy Economics and Policy, Econjournals, vol. 11(4), pages 486-503.
    3. Neuhoff, Karsten & Wolter, Sophia & Schwenen, Sebastian, 2016. "Power markets with Renewables: New perspectives for the European Target Model," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 37, pages 3-38.

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    More about this item

    Keywords

    Feed in tariff; financing renewables; project finance;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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