Risks and cost of capital for onshore wind energy investments in EU countries

The national binding targets, set for renewable energy deployment at European Union (EU), call for extended clean energy investments. Renewable energy projects require high up-front expenditures including, in many cases, considerable financing costs. The main objective of this paper is to elaborate and apply a methodology that allows assessing the most important risk categories related to renewable energy investments. The cornerstone of this approach is the weighted average cost of capital, which has been extracted for new onshore wind projects in EU-28 member states based on diverse methods e.g. Capital Asset Pricing Model. Moreover, to validate the model results, a series of interviews with renewable energy project developers and financers across the EU has been conducted. The results show that, following the country risk, policy-related risks exert the highest impact on the cost of capital. Moreover, there are significant discrepancies between different geographical regions and market deployment levels. To support policy makers' decision on effective risk-reducing policy designs, the assessment could also be extended to other renewable energy technologies.