Determinants of policy risks of renewable energy investments

Purpose - Policy or regulatory risks represent one of the major barriers for renewable energy investments, especially against the background of several retrospective reductions of support schemes in Europe. This paper aims to contribute to the literature by offering a categorization of major risk drivers and determinants of policy risk associated with renewable energy projects in developed countries. Design/methodology/approach - Based on a narrative (traditional) review of the academic literature and supported by industry studies regarding cases of support scheme cuts in Europe (from the end of 2010 until the end of 2013), the paper derives determinants of policy risks of renewable energy investments. Findings - As a main result, the paper offers a concise categorization of major risk drivers of policy and regulatory risks associated with renewable energy investments in developed countries along with potential indicators. Practical implications - The derived categorization of major risk drivers and the set of indicators are of high relevance for risk management and risk assessment of renewable energy investments, where understanding the underlying risk drivers is vital. The findings can thus be applied when establishing a sound risk management for renewable energy investments. Originality/value - The paper helps (potential) investors, policymakers and regulators to assess policy risks associated with renewable energy investments.