What drives the cost of capital of investments in RES?

At the 2nd edition of the FSR Innovation Bootcamp, Bjarne Steffen, senior researcher at ETH Zürich and visiting researcher at MIT, gave a presentation around his work on renewable energy financing. In this podcast, Bjarne discusses his work around the cost of capital of investments in renewables with Tim Schittekatte, researcher at the FSR. Bjarne and his co-authors found that between 2005 and 2017, the cost of capital for wind and solar reduced significantly in Germany and explains how three types of drivers contributed to this decline. Learnings around these drivers can aid to foster investment conditions for new technologies in a global context and can help to understand how the levelised cost of electricity can be impacted by changes in general interest rates. Finally, Bjarne’s findings are also important to inform policymakers when wanting to revise the renewable support schemes of which the design can strongly influence the cost of capital. Introducing support schemes that give more market signals can help to better integrate renewables but can come at an expense in terms of cost of capital.

Relevant work from Bjarne Steffen:
https://www.nature.com/articles/s41560-018-0277-y
https://www.nature.com/articles/s41893-019-0375-2