De-risking renewable energy investments: Assessing contract design and project finance using operational wind park data
How different contract types make wind farms cheaper to finance
Financial contracts can protect wind farm owners from electricity price swings just as well as traditional subsidy contracts, without forcing farms to ignore market prices. Using 12 years of hourly data from 63 German wind parks, researchers found that the usual trade-off between stable cash flows and efficient markets isn't inevitable—it depends on how the contract is written.
Renewable energy requires massive upfront investment, and lenders demand stable cash flows before they'll finance a project. Right now, many countries use expensive subsidy contracts to provide that stability. This research shows cheaper contract designs could deliver the same financial security while letting wind farms respond to real electricity market conditions, potentially lowering the overall cost of clean energy and reducing hidden subsidies.