| Green electricity prices could be reduced by up to 30% if policy improved - IEA-RETD report finds
Utrecht, December 16th 2008 - An International Energy Agency (IEA) report concludes that the cost of financing renewable electricity projects could be reduced by up to 30% with clearer and more efficient government policy design.
In the context of the current financial crisis, the implementing agreement on Renewable Energy Technology Deployment of the IEA (IEA-RETD) tasked Ecofys with assessing how support schemes could be designed in order to reduce the cost of financing renewable electricity generation projects. The IEA’s World Energy Outlook 2008 report, launched last month, projects a share of 40% for renewable energy by 2030 in one of its scenarios. The financing of this development presents a large challenge, especially in the current credit crisis. A healthy climate for investment in sustainable energy is essential.
The report entitled: Policy instrument design to reduce financing costs in renewable energy technology projects, presents interactions of risks and policy design in general. It also the specific project finance case of four large-scale renewable energy project cases in more detail: a 20 MW onshore wind energy project, a 100 MW offshore wind energy project, a 0.5 MW solar photovoltaic energy plant, and a 10 MW-electric / 26 MW-thermal biomass co-generation plant. The financial performance of each project was evaluated under different representative policy support schemes (Germany, France, Netherlands, United Kingdom, California, and Québec).
Government policy design influences the risks of financing renewable energy projects. Financiers want their risks to be as low as possible, which the report proofs to be achievable when stability of government policies is guaranteed or designed in a way that return on investment can be spread out over multiple years. Key elements for efficient policy design are stability, reliability, and predictability. Favourable and well designed tax deduction schemes and debt structures can further reduce the cost.
Hans Jørgen Koch, Chairman of the IEA-RETD, and Deputy State Secretary of the Danish Ministry of Climate and Energy / Danish Energy Agency comments: “This study is unique as it provides a comparative and quantitative assessment of a variety of policy support schemes in several IEA member countries from the investor’s perspective. From a policy maker’s point of view, it shows how large financing cost can be, and how policy design can reduce the prices of renewable electricity significantly. A better understanding of financing mechanisms and incorporation in policy instrument designs can really contribute to an accelerated deployment of renewable energy technologies.”
David de Jager, Manager Renewable Energy at Ecofys: “IEA-RETD and Ecofys share the same vision: renewable energy will be essential in combating climate change and reducing energy import dependency. Good policy design can accelerate this deployment of renewables significantly, with huge economic benefits.”
Note for the editor
The full report is available at www.iea-retd.org.
For more information please contact:
David de Jager
Manager Renewable Energy Ecofys
T: +31 30 66 23 388
E: D.deJager@ecofys.com
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