European Renewable Energy Policy and Investment

The report examines the relationship between policy design and investor behavior in the European renewable energy sector. It argues that a diverse range of investors—from small households to large utilities—can lower the overall cost of capital, but that policy choices (such as the shift from feed-in tariffs to auctions) can either encourage or exclude specific investor groups. The document provides comparative analysis of the UK, Germany, Iberia, and the Nordic region, highlighting how different regulatory environments have led to varying levels of deployment and cost-effectiveness across solar PV, onshore wind, and offshore wind technologies.

• The diversity of investor categories is a primary driver of the average cost of renewable energy to the system, as a broader range of investors generally leads to cheaper financing.
• In Germany, feed-in tariffs successfully attracted a wide range of investors, including small consumers and cooperatives, though this approach was not always the most cost-effective due to high returns for plants in suboptimal locations.
• The Spanish solar PV market was dominated by large-scale projects financed by utilities, but retroactive tariff cuts and overcapacity have severely damaged investor confidence and halted new investment.
• The UK is a global leader in offshore wind, but the government's decision to phase out subsidies for onshore wind and solar PV is expected to limit the role of developers and 'prosumers' in those sectors.
• The Nordic market, particularly Sweden, has seen a recent investment pause in onshore wind due to oversupply and low wholesale electricity and green certificate prices.
• Economic curtailment—the suspension of subsidies during periods of negative electricity prices—is a significant risk that could increase the cost of renewable energy by 17% or more.
• The transition to competitive auctions for renewable energy can exclude small investors due to high transaction costs and the complexity of the bidding process.
• Offshore wind requires the highest level of industrial sophistication and capital, with individual projects potentially exceeding €1bn, making it inaccessible to small or medium-scale investors.
• A 2% increase in base interest rates could lead to a 12.8% increase in the weighted average cost of renewables, as both debt and equity return requirements would rise.
• Lack of transmission interconnection, particularly between Spain and France, has contributed to overcapacity in Iberia and discouraged further investment.

APA

Nelson, D., O’Connell, B., De Lorenzo, L., & Huxham, M. (2016). European Renewable Energy Policy and Investment. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2016/12/Final-ERE-Policy-Investment-2016.pdf

Chicago

Nelson, David, Brian O’Connell, Luca De Lorenzo, and Matthew Huxham. European Renewable Energy Policy and Investment. Climate Policy Initiative, 2016. https://www.climatepolicyinitiative.org/wp-content/uploads/2016/12/Final-ERE-Policy-Investment-2016.pdf.

Wikipedia

{{cite report |last1=Nelson |first1=David |last2=O’Connell |first2=Brian |last3=De Lorenzo |first3=Luca |last4=Huxham |first4=Matthew |title=European Renewable Energy Policy and Investment |publisher=Climate Policy Initiative |date=November 2016 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2016/12/Final-ERE-Policy-Investment-2016.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{nelson2016european, author = {Nelson, David and O’Connell, Brian and De Lorenzo, Luca and Huxham, Matthew}, title = {{European Renewable Energy Policy and Investment}}, institution = {Climate Policy Initiative}, year = {2016}, month = nov, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2016/12/Final-ERE-Policy-Investment-2016.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }