The rising cost of capital could threaten to derail the expansion of renewable energy projects, such as solar and onshore wind farms, according to a new report.
Data from UK-based consultants Cornwall Insights reveals that the weighted average cost of capital for renewable projects has risen by about 4% since early 2021. The firm believes that some projects which are already commissioned are now becoming financially unviable, meaning that many could be put on hold until new financing is secured.
While the cost of finance is a significant barrier, other issues such as continued high inflation, supply chain problems, and labour shortages are some of the other key barriers facing the renewables sector. This report mirrors the conclusion of Energy UK’s latest publication, which states that the costs of developing renewable projects have increased by between 20% and 30%, with some projects seeing an increase of 50%.
While the report was based on the UK market, developers of new solar and wind projects in Ireland are facing the same challenges. The rising cost of capital could mean that some projects could be rendered unviable without higher levels of Government support.