The cost of capital, in turn, depends on the cost of debt and the cost of equity. Wind farms are typically financed using a mixture of the two in an 80/20 proportion.
Lenders and equity investors are strongly influenced by what they determine to be the risk of the project, which, in turn, depends on an assessment of the "technology risk" and the "policy risks". So, for example, offshore wind is considered more risky than onshore wind.
The range of interest rates is very wide. Germany has the lowest - at 3.5-4.5%, and Greece has the highest, at 12% (see chart).
These rates have a crucial effect on the cost of energy.
A wind farm in Germany, costing €1,200/kW in capital cost, at a site with a mean wind speed of 7.5m/s, would need remuneration at around €52/MWh in order to be viable. In Greece, however, that same project would need remuneration of around €84/MWh, assuming the contract period in each case is 20 years.
Wind speeds – Europe counts the gain from windy year
Assessments of wind projects' profitability are based on wind-speed records over a number of years. If there is a trend towards lower wind speeds, profitability is likely to be lower than anticipated, and, of course, vice versa. The possible impacts of climate change are uncertain, with some studies suggesting wind speeds will increase, others that they will fall, or vary from place to place.
Last year winds in four locations in northern Europe (UK, Germany, Sweden and Denmark) were higher than they had been for some time. This could herald an emerging trend, although data from a single year is not sufficient to establish this.
The Danish wind energy index, published by EMD International, was 14% higher than the long-term mean, and the highest in a 13-year period. Danish wind generated more than 14TWh in 2015, and the capacity factor, based on the average over the year, was 28.3%.
Data from the UK's Department of Energy and Climate Change (Decc), suggests that 2015 was Britain's windiest year since 2001. The 2015 mean was 4.4% higher than the long-term mean, and the performance of wind turbines was markedly higher. (A 4.4% rise in wind speeds corresponds to an increase of around 6.5% in electricity generation.)
The UK's onshore wind capacity grew by around 7%, but generation increased by 21%; offshore wind capacity rose by 14% for a 23% boost in generation. Nationwide, capacity factors were 29.9% for onshore wind and 41.3% for offshore.
In Germany, the Fraunhofer Institute reported that the productivity of the country's wind turbines during 2015 was nearly 20% higher than the ten-year mean.
The institute reports nearly 2,000 full load hours in 2015, compared with a ten-year mean of around 1,600 hours. While some of this increase may be attributable to the use of taller and more efficient turbines - some offshore - there is strong evidence that higher wind speeds were the main factor.
The picture from Sweden is similar. Electricity production from wind last year was 36% higher than in 2014, according to Swedish wind association Svensk Vindenergi (SV), even though the increase in capacity was only 11%.
As in Germany, the introduction of taller turbines may account for some of the increase, but SV shows that electricity production was far higher than might be expected in a normal wind year.
It is too early to say whether 2015 was an exceptional year, or whether it reflects the start of a long-term trend. Evidence from the first quarter of 2016 is inconclusive, with both the UK's Decc and the Danish Wind Index suggesting winds were slightly lower than the long-term mean.
AT A GLANCE - THIS MONTH'S REPORT CONCLUSIONS
Danish Wind Index; UK Department of Energy and Climate Change; Fraunhofer Institute, Germany; Svensk Vindenergi, Sweden Wind data and wind indices from all four bodies show that wind speeds in northern Europe during 2015 were higher than for many years.
The impact of risks in renewable energy investments and the role of smart policies, Ecofys et al, 2016 A review of the weighted average cost of capital (Wacc) in EU member states, showing equity and debt contributions, as well as typical gearing ratios, reveals wide variations between countries.