Basel Iii and Solvency Ii: Are the Risk Margins for Investments in Pv and Wind Adequate?. Issue 1 (February 2013)

• Record Type: Journal Article
• Authors: Breitschopf, Barbara; Pudlik, Martin
• Is Part Of: Energy & environment. Volume 24:Issue 1/2(2013)
• Page Start: 171
• Page End: 194
• Publication Date: 2013-02
• Subjects: RE investment -- RE risks -- Basel regulation; Power resources -- Environmental aspects -- Periodicals; Power resources -- Periodicals; Renewable energy sources -- Periodicals; Energy policy -- Environmental aspects -- Periodicals; Ressources énergétiques; Politique énergétique; Energy policy -- Environmental aspects; Power resources; Power resources -- Environmental aspects; Renewable energy sources; Periodicals; 333.7
• DOI: 10.1260/0958-305X.24.1-2.171
• Languages: English
• ISSNs: 0958-305X

Abstract

Worldwide investments in renewable energy (RE) have doubled between 2007 and 2011 while the financial crisis has led to stricter regulations. The paper describes the impacts of risk provision requirements on financing costs of RE investments. The risk assessment indicates that under the given conditions in Germany, policy and market risks are considered to be zero. Technical, performance and other risks are to be around 1.6 to 2.1 % p.a. So therefore, yield risk is left as the only determining default risk of RE investments. The risk provisions of RE investments are compared to the RE default risks by applying a simple cash-flow model. The findings show that risk provisions are not adequate for default risks and increase financing costs, and hence investment costs, in German PV and onshore wind generation plant, by up to EUR 13 million for large PV plants and EUR 8 million for wind parks (2011).