South East European countries have a high potential for renewables expansion and investment; however, they are suffering from high financing costs for renewable projects as they are still perceived as a riskier investment by investors. As a result, renewables face higher cost of capital rates, which increases the electricity prices paid by end consumers. The investment environment for renewables in SEE countries could be considerably strengthened if political and regulatory risks were mitigated, leading to lower financing costs that are comparable or even below that of traditional fossil fuel investments in the region. Governments can address specific investment risks by introducing policies, programmes, and financial measures that “de-risk” investment decisions.
This project focused on the economic benefits of “de-risking” policies for selected project types in SEE countries. It builds on the conceptual work done by Agora Energiewende on the “de-risking” of renewable energy investments and proposed rules for the new EU budget 2021-2027 that enable governments to use part of their EU funds for “de-risking” activities.
The project analyzed in particular the significant cost reduction potential for investment in renewables that could result from inclusion of derisking measures in the new EU budget framework, in conjunction with the implementation of the new Renewable Energy Directive. Our analysis indicated that financial derisking measures are promising tools for enhancing RES deployment rates. They can have a considerable impact on RES financing costs, thus lowering the cost of onshore wind energy by up to 30 per cent.
New Climate Institute in cooperation with Agora Energiewende and our local think tank partners Association for Sustainable Development (ASOR) from Serbia and National Observatory of Athens (NOA)/Institute for Environmental Research and Sustainable Development (IERSD) from Greece conducted the research performed in the project. The project is linked to two regional projects of Agora Energiewende: South East Europe Energy Transition Dialogue and Western Balkans Energy Transition Dialogue.
The project is supported by the European Climate Foundation (ECF), EUKI and the Austrian Ministry for Sustainability and Tourism.