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Financing Power: Impacts of Energy Policies in Changing Regulatory Environments

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  • Nils May
  • Karsten Neuhoff

Abstract

Power systems with increasing shares of wind and solar power generation have higher capital and lower operational costs than traditional technologies. This increases the importance of the cost of finance for total system cost. We quantify how renewable policy design can influence cost of finance by addressing regulatory risk and facilitating hedging. We use interview data on wind power financing costs from the EU and model how long-term contracts signed between project developers and energy suppliers impact financing costs in the context of green certificate schemes. Be- tween the policy regimes, the cost of renewable energy deployment differ by 30%.

Suggested Citation

  • Nils May & Karsten Neuhoff, 2017. "Financing Power: Impacts of Energy Policies in Changing Regulatory Environments," Discussion Papers of DIW Berlin 1684, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp1684
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Đukan, Mak & Kitzing, Lena, 2023. "A bigger bang for the buck: The impact of risk reduction on renewable energy support payments in Europe," Energy Policy, Elsevier, vol. 173(C).
    2. Isvia Zazueta & Edgar Valenzuela & Alejandro Lambert & José R. Ayala & Rodny Garcia, 2025. "Supply Chain Model for Mini Wind Power Systems in Urban Areas," Resources, MDPI, vol. 14(3), pages 1-19, February.
    3. Steffen, Bjarne, 2020. "Estimating the cost of capital for renewable energy projects," Energy Economics, Elsevier, vol. 88(C).
    4. Fabra, Natalia, 2021. "The energy transition: An industrial economics perspective," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    5. Chiappinelli, Olga & May, Nils, 2022. "Too good to be true? Time-inconsistent renewable energy policies," Energy Economics, Elsevier, vol. 112(C).
    6. Iwona Bąk & Anna Spoz & Magdalena Zioło & Marek Dylewski, 2021. "Dynamic Analysis of the Similarity of Objects in Research on the Use of Renewable Energy Resources in European Union Countries," Energies, MDPI, vol. 14(13), pages 1-24, July.
    7. Adriana Grigorescu & Camelia Speranta Pirciog & Cristina Lincaru, 2024. "Space–Time Forecasting of Heating & Cooling Energy Needs as an Energy Poverty Measure in Romania," Energies, MDPI, vol. 17(20), pages 1-19, October.
    8. Soysal, Emilie Rosenlund, 2025. "Market-based wind power investments under financial frictions," Applied Energy, Elsevier, vol. 391(C).
    9. Kimura, Keiji & Lundberg, Liv & Kåberger, Tomas, 2025. "How high feed-in tariffs impacted the capital cost of solar PV in Japan," Renewable Energy, Elsevier, vol. 244(C).
    10. Karsten Neuhoff & Nils May & Jörn C. Richstein, 2018. "Renewable Energy Policy in the Age of Falling Technology Costs," Discussion Papers of DIW Berlin 1746, DIW Berlin, German Institute for Economic Research.
    11. M. Calcaterra & L. Aleluia Reis & P. Fragkos & T. Briera & H. S. Boer & F. Egli & J. Emmerling & G. Iyer & S. Mittal & F. H. J. Polzin & M. W. J. L. Sanders & T. S. Schmidt & A. Serebriakova & B. Stef, 2024. "Reducing the cost of capital to finance the energy transition in developing countries," Nature Energy, Nature, vol. 9(10), pages 1241-1251, October.
    12. Rafal Cieslik, 2025. "The Renewable Energy Paradox: Second-Generation Economic Challenges in the Global Energy Transition," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 971-991.
    13. Agnieszka Sompolska-Rzechuła & Aneta Becker & Anna Oleńczuk-Paszel, 2025. "Territorial Variation of Energy Poverty and Good Health and Well-Being in European Union Countries—A Spatial Analysis," Energies, MDPI, vol. 18(20), pages 1-33, October.
    14. Thomas Baldauf & Patrick Jochem, 2024. "Project finance or corporate finance for renewable energy? an agent-based insight," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 19(4), pages 759-805, October.
    15. Xia, Fang & Lu, Xi & Song, Feng, 2020. "The role of feed-in tariff in the curtailment of wind power in China," Energy Economics, Elsevier, vol. 86(C).

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    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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