Sian Crampsie

The evolution of traditional renewable energy support mechanisms and maturing renewable power generation assets means that Europe’s renewable energy markets are no longer a low risk proposition for investors.

A new report from management consultants Pöyry shows that investors in Europe’s renewable energy sector should significantly change their risk assessments and forecasts increased risks to renewables revenues.

According to Pöyry, assets are maturing and will soon reach a point when they are no longer eligible for support schemes such as feed-in tariffs (FITs). In addition, these support schemes are changing and may no longer protect renewables generators from wholesale electricity price fluctuations.

"The virtually risk-free environment of FIT schemes, where investors could invest and forget, will cease to exist," said Phil Hare from Pöyry Management Consulting. "Operators will also have to actively manage these new risks by setting up trading operations or finding financial or physical trading counterparties and then implementing risk management strategies."

Pöyry says that support mechanisms are evolving in markets such as France and Germany towards ‘top-up’ tariffs, where generators trade their power in the market and have their wholesale market revenues topped up from a benchmark price to a fixed support level.

Such top-up schemes expose generators to balancing risks and to a basis risk if the generator is unable to sell its output at the benchmark price. New projects funded under the top-up schemes will be far more exposed to the market than those funded by FITs, says Pöyry.