Researchers at DTU Mak Dukan and Lena Kitzing have recently published a paper titled “The impact of auctions on financing conditions and cost of capital for wind energy projects” on the journal Energy Policy. The paper presents an overview of the interactions between auctions and financing conditions, by linking finance theory, RES auction applications and interviews with dozens of experts in onshore and offshore wind project development and financing in Europe. Among other results, the authors found that auctions pressure sponsors and bankers to reduce debt and equity margins, and that despite increasing price risk, project financing conditions have improved. Furthermore, it emerges that the risk of being awarded support has the largest impact during project development, and that overall auctions could both improve and deteriorate planning risk. Ultimately, the paper lays the groundwork for uncovering the cause-effect relations between auctions and different elements of cost of capital and financing.

The (open-source) article is available for reading and download here.