The impact of interest rates

1 January 2007

While the cost of coal or gas generation is heavil influenced by fuel prices, the cost of wind power lies mainly in financing the capital investment. A wind project financed over 15 years at an interest rate of eight per cent cannot beat gas on cost. But when interest rates drop to five per cent (or the loan is over a longer period) wind gives gas a hard time. This text accompanies two graphs with the main story Back to Being a Model of Stability.

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The decisive factor: While the cost of coal or gas generation is heavily influenced by fuel prices, the cost of wind power lies mainly in financing the capital investment. A wind project financed over 15 years at an interest rate of 8% (left) cannot beat gas on cost. But when interest rates drop to 5% (or the loan is over a longer period) wind gives gas a hard time (right)

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