With South East Europe already strongly impacted by climate change, it is imperative to rapidly reduce power sector emissions. In a region that relies heavily on old and polluting lignite-fired power plants, renewables, especially wind and solar PV, offer an important, cost competitive solution for power sector modernisation and for reducing greenhouse gas emissions.
However, current market and political conditions in South East Europe restrict the cost-competitive potential of renewable energies. Lack of political commitment and complex regulatory and administrative environments translate into higher investment risks. These risks disproportionally increase the cost of capital of renewable energy investments.
The European Union is therefore pushing to “de-risk” renewable energy investments within the Union and in its neighborhood through regulatory means and through innovative financial measures.
Our study focuses on the potential economic benefits of a new EU budget guarantee mechanism for renewable energy investments that is discussed as part of the new multiannual EU budget. To analyse the likely benefits of the new budget guarantee mechanism, we commissioned experts from the NewClimate Institute to quantify its cost reduction potential alongside other non-financial “de-risking” measures. The report presents our findings for onshore wind investment in Greece and Serbia. The results are very encouraging, which strengthens the case for maintaining the proposed EU budget guarantee mechanism as part of the new multiannual EU budget. Lowest possible financing costs for renewable energies are one important component of coal-to-clean transition debates in South East Europe.