Estimating the cost of capital for wind energy investments in Turkey

Wind power represents a key component of Turkey’s national energy strategy. Based on data collected on 138 installations in the country, this paper pr

Publishing date: 07 May 2019
Authors: Georg Zachmann Simone Tagliapietra Gustav Fredriksson

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The research was carried out with the kind support of Stiftung Mercator.

Wind power represents a key component of Turkey’s energy strategy. Increased investment will be required to meet Turkey’s wind power target and, as such, there is a need to understand the viability of wind power projects there. The cost of capital is a crucial element in wind power investment decisions owing to the high capital intensity of wind power plants. A reduction in the cost of capital through support policies can lower overall project costs and increase investment.

We estimate the cost of capital for wind power projects in Turkey using data on 138 installations that participated in the Turkish feed-in tariff scheme in 2017. Our estimates indicate an upper bound of 12% for the cost of capital. This suggests the cost of capital for wind power projects in Turkey is not higher than in south-eastern European Union countries. However, because of adverse macroeconomic conditions, the cost of Turkey’s main renewable support scheme increased by 46% between 2016 and 2017 in Turkish lira terms. We argue that continued commitment to the current support schemes by the Turkish authorities is crucial for the development of the Turkish wind power sector.

About the authors

Georg Zachmann

Georg Zachmann is a Senior Fellow at Bruegel, where he has worked since 2009 on energy and climate policy. His work focuses on regional and distributional impacts of decarbonisation, the analysis and design of carbon, gas and electricity markets, and EU energy and climate policies. Previously, he worked at the German Ministry of Finance, the German Institute for Economic Research in Berlin, the energy think tank LARSEN in Paris, and the policy consultancy Berlin Economics.
Simone Tagliapietra

Simone Tagliapietra is a Senior fellow at Bruegel. He is also a Professor of EU Energy and Climate Policy at The Johns Hopkins University - School of Advanced International Studies (SAIS) Europe.

His research focuses on the EU climate and energy policy and on the political economy of global decarbonisation. With a record of numerous policy and scientific publications, also in leading journals such as Nature and Science, he is the author of Global Energy Fundamentals (Cambridge University Press, 2020) and co-author of The Macroeconomics of Decarbonisation (Cambridge University Press, 2024).

His columns and policy work are widely published and cited in leading international media such as the BBC, CNN, Financial Times, The New York Times, The Economist, The Guardian, The Wall Street Journal, Süddeutsche Zeitung, Frankfurter Allgemeine Zeitung, Corriere della Sera, Le Monde, El Pais, and several others.

Simone also is a Member of the Board of Directors of the Clean Air Task Force (CATF). He holds a PhD in Institutions and Policies from Università Cattolica del Sacro Cuore. Born in the Dolomites in 1988, he speaks Italian, English and French.
Gustav Fredriksson

Gustav, a Swedish citizen, worked at Bruegel as a Research Assistant in the area of Energy and Climate.

Prior to joining Bruegel, Gustav worked as a Junior Consultant for the International Labour Organization in Zambia. He also did an internship at Frontier Economics, where he worked on energy-related issues.

Gustav holds a MSc in Economics from the Stockholm School of Economics, which included an exchange semester at Bocconi University. His master’s thesis focused on the impact of wind power on the level and the volatility of the electricity price in the Nordic-Baltic market. Gustav also has a BSc in Economics and Business Economics from Erasmus University Rotterdam.

Gustav’s research interests lie within the fields of energy and competition. He is a native speaker of Swedish and English, and speaks French fluently.