Guide to Wind Development Financing Designed To Increase Investment Pool

May 8, 2018

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Photo of a wind turbine mid-construction.
A recently published National Renewable Energy Laboratory guide addresses the mitigation of risk related to investment and financing of wind energy projects. Photo by Dennis Schroeder, NREL 20878

The numbers speak for themselves. Investment in U.S. wind energy has averaged nearly $13.6 billion annually since 2006, totaling more than $140 billion—demonstrating wind energy's persistent appeal and its increasing role in the U.S. electricity generation portfolio.

And yet, some investors still consider wind energy a specialized asset class. To address this, the National Renewable Energy Laboratory is leading an effort called Performance, Risk, Uncertainty, and Finance, or PRUF. PRUF focuses on the mitigation of risk related to investment and financing of wind energy projects.

As part of the PRUF initiative, NREL researchers published Wind Energy Finance in the United States: Current Practice and Opportunities, a representative and wide-ranging resource for the wind development and financing processes. The publication provides an overview of the wind project development process, capital sources, and common financing structures, as well as traditional and emerging procurement methods.

The report also provides a high-level demonstration of how financing rates impact a project's overall cost of energy and its cost competitiveness with other investment alternatives.

Through activities such as PRUF and general industry maturation, a broad and widely understood assessment of wind energy project risk among developers, investors, and policymakers can help to expand the potential pool of industry investors and drive down the cost of capital for the wind industry. Reducing the cost of capital can lead to reductions in the levelized cost of energy, which in turn contributes toward wind energy competitiveness in the marketplace.