Open access
Date
2023-06-16Type
- Journal Article
Abstract
Offshore wind will play a critical role in decarbonizing Europe's energy infrastructure. Nevertheless, according to recent financing cost surveys, its investment risk expressed as the cost of capital (CoC) is higher than for onshore wind and solar photovoltaics. This perspective elaborates on the possible reasons behind the offshore wind CoC premium and potential remedies. Our analysis discusses that the massive capital expenditures and construction complexity have concentrated European offshore wind ownership among utilities and oil & gas companies that owing to their legacy investments in fossil fuel infrastructure, have higher return expectations for offshore wind assets. Furthermore, these large-scale investors are bidding zero and negative in highly competitive auctions for offshore wind sites, increasing the project's merchant risks and CoC. We discuss possible policy solutions to alleviate these risks, including revenue stabilization, enabling a more liquid refinancing market, and creating more robust corporate Power Purchase Agreements via government guarantees. Show more
Permanent link
https://doi.org/10.3929/ethz-b-000617183Publication status
publishedExternal links
Journal / series
iScienceVolume
Pages / Article No.
Publisher
ElsevierOrganisational unit
09742 - Steffen, Bjarne / Steffen, Bjarne
09550 - Schmidt, Tobias / Schmidt, Tobias
Funding
948220 - Effective green financial policies for the low-carbon transition (EC)
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