Cost of capital for renewables and enabling technologies: Measuring the multidimensional heterogeneity in Switzerland
Year: 2025
Type: article
Abstract: The cost of capital (CoC) is a critical parameter that significantly impacts the levelized costs of low-carbon energy technologies and cost-optimal decarbonization pathways. Nevertheless, empirical evidence on CoC differences between technologies and investor types is limited. Here, we study the heterogeneity among 11 technologies based on 193 CoC inputs from utilities, financial investors, and project developers in Switzerland. We find a wide range of CoC values across the technologies, averaging 3.6 % for small rooftop PV and 7.8 % for green hydrogen. Furthermore, we record an empirical variation of six percentage points even for assets of the same technology group, like solar PV, indicating differences between business models and investor types. Unlike neighboring countries that primarily rely on project finance for renewables, we find balance sheet financing to play an essential role for Swiss investors. Our results stress the need to differentiate CoC assumptions in energy system modeling and to consider not only technologies but also investor types and regional specificities as additional CoC dimensions. • We analyze the costs of capital (CoC) for eleven technology types in Switzerland. • The CoC range between 7.8 % for green hydrogen to 3.6 % for small scale rooftop PV. • Utilities have the lowest CoC, followed by financial investors and developers. • We show energy system analysts should differentiate CoC between technologies.
Source: Applied Energy
Authors: Mak Đukan, Bjarne Steffen
Institution: ETH Zurich
Language: English
Subfield: Electrical and Electronic Engineering
Field: Engineering
Domain: Physical Sciences
Open Access status: hybrid
Estimated APC paid: $4,430
Funder: Bundesamt für Energie
Award: G2104659063
OpenAlex ID: W4409202801