The cost of capital (CoC) for renewables matters. The CoC is a major determinant of the total price to purchasers of electricity from renewable power generation technologies. If assumptions used for the CoC are not accurate – over time, between countries or technologies – then the cost of electricity might be significantly misrepresented and result in poor policy making.

A comprehensive database on renewable energy financing. This IRENA report presents new CoC data, obtained from an expert survey and interviews covering all major world regions for onshore wind, offshore wind and solar photovoltaic (PV). The coverage of this survey – both in terms of geography and technology – is believed to be among the most wide-ranging of any existing database on renewable energy financing.

Material differences exist in the CoC across countries and technologies. The weighted average CoC obtained through a survey of experts in 45 countries varied from as little as 1.1% (onshore wind in Germany) to above 10% (solar PV in Ukraine), all in nominal terms, for the period 2019-2021.

The regional average CoC in mature markets across the three renewable energy technologies considered (4.4% in Europe and 5.4% in North America) is lower – sometimes considerably lower – than in emerging markets, for instance, in the Asia-Pacific region (5.6%) or Latin America (6.9%).

Rates in the Middle East and Africa are the highest, at 8.2% on average. In general, across regions, the CoC for the renewables covered in this report is 200-300 basis points above the country risk. 1 There is no single value for the CoC within a market for a given technology. The survey results revealed that in individual markets the CoC for a given technology varied, sometimes significantly, across respondents. For solar PV in Spain, for instance, the CoC ranged from 36% below to 72% above the average, while for Italy the range was from 43% below to 44% above. The CoC depends on the developer, offtake arrangements and other project-specific factors.

The survey and interviews are part of an integrated, three-pronged approach to collecting data on the CoC. Where survey and interview data are absent, a benchmark tool may be used to estimate the CoC for various technologies. This allows updated CoC estimates to be generated as underlying base rates change in response to macroeconomic conditions. Combining several data sources and expert elicitation approaches allows for the derivation of robust CoC values across the widest possible range of countries.

A benchmark tool to calculate country- and technology-specific CoC values can yield robust estimates after calibration with survey data. The CoC estimates generated by the CoC benchmark tool developed for this project provided reasonably robust estimates of the CoC for renewable power generation technologies in different markets. However, technology and market drivers in some countries are inevitably at variance to a simple benchmark tool value. Calibrating the benchmark tool with findings from the stakeholder survey greatly improves the tool’s results, but further work to refine this process is warranted.