Subsidies ensure low risks

Thursday, 24 September, 2015 - 11:45

The design of subsidy schemes and tax regimes determines the attractiveness for investors as it can change the risk profile and, therefore the cost of capital and levelized cost of energy (LCOE). TKI Wind op Zee has released a report which compares offshore wind subsidies and taxes in six European countries.

The report, released by the TKI Wind op Zee (Top consortium for Knowledge and Innovation Offshore Wind), identifies the differences in subsidy schemes and tax regimes for offshore wind in France, Belgium, Denmark, Germany, the UK and the Netherlands. The TKI Wind op Zee commissioned PricewaterhouseCoopers (PwC) to conduct this study. It dates from April 2015, but was not made public before September 21.

The study has analysed two policy routes to make offshore wind projects more attractive to investors; through subsidies and/or tax schemes. Both methods, if designed effectively, can reduce LCOE. Through risk shifting between public and private parties the cost of capital and LCOE can be optimised.

All subsidy and tax systems analysed, have a low risk profile in general, as the feed-in tariffs and feed-in premiums are designed to ensure that investors obtain sufficient revenue. But there are differences in the schemes per country and those differences impact the risk level for investors. Lowest risks are in Denmark, UK and France, while the Dutch and Belgian systems contain at least “some risk”.

Katharina Garus

Country Subsidy scheme Risk for investors Comments
The Netherlands SDE +,
Feed-in premium
Some risk - Price cap,
- Annual electricity
  price as a
  reference
Belgium Groenestroomcertificaten,
Feed-in premium
Some risk - No price cap
- Annual electricity
  price as a
  reference
Denmark Public Service Obligation (PSO),
Feed-in premium
Lowest risk - No price cap
- Hourly electricity
  price as
  a reference
Germany Einspeisevergütung (§ 50 EEG),
Feed-in premium
Limited risk - No price cap
- Monthly electricity
  price as
  a reference
UK Contracts for Difference,
Feed-in premium
Lowest risk - No price cap
- Hourly electricity
  price as a
  reference
France Renewable Energy Directive (offshore),
Feed-in tariff
Lowest risk - No price cap
- No exposure to
  market prices

 

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