The ImpacTs of polIcy on The fInancIng of Renewable pRojecTs: a case sTudy analysIs

The report analyzes six case studies—onshore wind in the U.S. and Spain, solar PV in the U.S. and Italy, a solar power tower in the U.S., and offshore wind in Denmark—to determine how policy impacts the cost of finance. It identifies seven policy impact pathways, finding that the duration of revenue support and revenue certainty are the most critical factors in reducing financing costs. The analysis shows that while most projects' costs and returns align with benchmarks, the Italian PV case experienced inflated costs and returns due to a rush to qualify for a Feed-in-Premium. The report concludes that policies reducing risk and providing revenue certainty are essential for attracting institutional investors and scaling innovative technologies.

• Policy support was essential for the viability of all six studied projects, providing between 36% and 81% of the cost of electricity. U.S. projects utilized a mix of cost and revenue supports, whereas European projects relied more heavily on revenue support.
• The duration of revenue support is the most significant factor affecting financing costs. Reducing the duration of support and long-term debt by 10 years increases financing costs by 11-15% of the levelized cost of electricity (LCOE) without supports.
• Revenue certainty is the second most important factor for financing costs. Shifting from fixed electricity prices (like Feed-in-Tariffs or PPAs) to a premium plus market prices increases financing costs by 4-11% of the LCOE without supports.
• Investor risk perceptions significantly influence costs; higher requirements for equity and debt returns can increase financing costs by 3-9% of the LCOE without supports.
• For innovative or less mature projects, government protections against default or direct debt provision are critical. For example, if the U.S. solar power tower were financed without debt, it would have faced additional financing costs equal to 38% of the LCOE without supports.
• The availability of construction debt significantly reduces financing costs, with impacts ranging from 8-23% of the LCOE without supports across the six cases.
• The Italian solar PV facility (Rovigo) exhibited abnormally high equity returns (estimated 27%) and a cost of electricity more than double that of the U.S. PV facility, driven by a high Feed-in-Premium and a rush to complete the project before the premium expired.
• Institutional investors are attracted to renewable projects when there is high revenue certainty, arrangements that insulate them from completion and policy risks, and when the investors possess internal expertise in renewable investments.

APA

Varadarajan, U., Nelson, D., Morgan, B. P., & Hervé-Mignucci (2011). The ImpacTs of polIcy on The fInancIng of Renewable pRojecTs: a case sTudy analysIs. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2011/12/Policy-Impacts-on-Financing-of-Renewables.pdf

Chicago

Varadarajan, Uday, David Nelson, Brendan Pierpont Morgan, and Hervé-Mignucci. The ImpacTs of polIcy on The fInancIng of Renewable pRojecTs: a case sTudy analysIs. Climate Policy Initiative, 2011. https://www.climatepolicyinitiative.org/wp-content/uploads/2011/12/Policy-Impacts-on-Financing-of-Renewables.pdf.

Wikipedia

{{cite report |last1=Varadarajan |first1=Uday |last2=Nelson |first2=David |last3=Morgan |first3=Brendan Pierpont |last4=Hervé-Mignucci |title=The ImpacTs of polIcy on The fInancIng of Renewable pRojecTs: a case sTudy analysIs |publisher=Climate Policy Initiative |date=3 October 2011 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2011/12/Policy-Impacts-on-Financing-of-Renewables.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{varadarajan2011impacts, author = {Varadarajan, Uday and Nelson, David and Morgan, Brendan Pierpont and Hervé-Mignucci}, title = {{The ImpacTs of polIcy on The fInancIng of Renewable pRojecTs: a case sTudy analysIs}}, institution = {Climate Policy Initiative}, year = {2011}, month = oct, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2011/12/Policy-Impacts-on-Financing-of-Renewables.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }