Solar WACC Europe 2025-2026 — Cost of Capital by Country

The Weighted Average Cost of Capital (WACC) is arguably the single most impactful variable in solar project economics. A 1 percentage point shift in WACC can move LCOE by 5-8%. This page presents observed WACC data for solar PV across European markets, based on AURES II investor surveys and IRENA benchmarks, and explains the structural drivers behind country-level differences.

2.5-8%

WACC range across EU

5-8%

LCOE impact per 1pp WACC

countries surveyed (AURES II)

70-85%

typical debt share (utility)

1. Solar WACC by Country — Observed Data

Data from AURES II (eclareon/DTU, 2020): survey of investors and developers in 12 EU countries. All values are nominal, for solar PV utility-scale projects. Ranges reflect diversity of respondents and project structures.

Country	WACC (nominal)	Cost of Debt	Cost of Equity	Typical D/E
France	2.3 – 4.3%	1.5 – 3.0%	6 – 10%	80/20 – 85/15
Germany	2.5 – 4.0%	1.5 – 2.5%	6 – 9%	80/20 – 85/15
Spain	3.0 – 9.0%	2.0 – 4.0%	8 – 14%	70/30 – 80/20
Italy	5.0 – 7.0%	2.5 – 4.5%	8 – 12%	70/30 – 80/20
Portugal	3.0 – 9.0%	2.0 – 4.0%	8 – 14%	70/30 – 80/20
Greece	5.5 – 6.5%	3.5 – 5.0%	9 – 13%	65/35 – 75/25
Romania	7.5 – 8.0%	4.0 – 6.0%	10 – 15%	60/40 – 70/30
Hungary	4.4 – 6.1%	3.0 – 5.0%	8 – 12%	65/35 – 75/25
Bulgaria	3.8 – 6.7%	3.0 – 5.0%	8 – 12%	65/35 – 75/25
Cyprus	4.8 – 5.2%	3.0 – 4.5%	8 – 11%	65/35 – 75/25

Source: AURES II D5.2, eclareon/DTU (2020), survey data 2018-2019. Nominal values. Spain's wide range reflects merchant vs contracted project mix.

2. What Drives WACC Differences Across Europe

Lower-WACC markets (France, Germany)

France and Germany achieve the lowest solar WACC in Europe thanks to several structural advantages. Strong regulatory frameworks provide revenue visibility: CRE contract-for-difference tenders in France and EEG Marktprämie in Germany guarantee a predictable cash flow for 20 years, dramatically reducing equity return requirements.

Deep banking markets with experienced renewable energy desks allow high leverage (80-85% debt). ECB monetary policy historically kept base rates low, though the 2022-2023 tightening cycle has added 100-150 bps to cost of debt across the eurozone.

Higher-WACC markets (Italy, Romania, Greece)

Italy's elevated WACC (5-7%) reflects sovereign risk premium, complex permitting (adding development risk), and a less mature project finance market compared to France or Germany. The transition from Conto Energia to the new FER 2 auction system creates regulatory uncertainty.

Romania's high WACC (7.5-8%) stems from non-eurozone currency risk (RON), a smaller banking market with limited renewable energy expertise, and a less predictable regulatory environment. These factors force developers to accept lower leverage (60-70% debt) and higher equity return hurdles.

The merchant risk premium — Spain's wide range explained

Spain shows the widest WACC range in the dataset (3-9%), which reflects its unique market structure. Projects with 10-year corporate PPAs achieve WACC close to French levels (3-5%), because the contracted revenue stream allows high leverage. Fully merchant projects — exposed to wholesale price volatility — see equity investors demanding 12-15% returns and banks limiting debt to 60-70% of CAPEX, pushing blended WACC above 7%. The growing share of merchant projects in Spain's pipeline is a key factor in the country's financing dynamics.

3. WACC Impact on LCOE — A Practical Example

Solar projects are capital-intensive with near-zero marginal costs. This means financing costs (captured through WACC) are as important as hardware costs in determining project competitiveness. The table below illustrates the LCOE impact of different WACC levels for a reference utility-scale project.

WACC (nominal)	Indicative LCOE	Typical market
3%	30-38 €/MWh	France, Germany (contracted)
5%	38-48 €/MWh	Spain (PPA), Netherlands
7%	46-58 €/MWh	Italy, Spain (merchant), Greece
9%	55-70 €/MWh	Romania, emerging EU markets

Reference project: 700 €/kWp CAPEX, 1,200 kWh/kWp yield, 25-year lifetime, 10 €/kWp/yr OPEX, 0.5%/yr degradation. Illustrative only.

Sources & Methodology

→ AURES II D5.2 — eclareon/DTU (2020), investor survey 2018-2019, 12 EU countries
→ IRENA Renewable Power Generation Costs 2023 — regional WACC benchmarks
→ ECB Statistical Data Warehouse — eurozone interest rates, government bond yields
→ National sources: CRE (France), Bundesnetzagentur (Germany), GSE/ARERA (Italy)

AURES II data dates from 2018-2019 surveys. Post-2022 ECB rate hikes have added ~100-150 bps to cost of debt across the eurozone. Current 2025-2026 WACC estimates should be adjusted accordingly. Values are indicative and do not constitute investment advice. Last updated: Q1 2026.

Frequently Asked Questions

What is WACC and why does it matter for solar projects?

WACC (Weighted Average Cost of Capital) represents the blended return expected by all capital providers (debt and equity). For a project with 80% debt at 3% and 20% equity at 10%, WACC = 0.8 × 3% + 0.2 × 10% = 4.4%. It is the discount rate used to calculate LCOE and project NPV. A 1 percentage point increase in WACC typically raises LCOE by 5-8%, making it one of the most sensitive variables in solar project economics.

Why does solar WACC vary across European countries?

Key drivers include sovereign risk premiums (reflected in government bond spreads), banking sector appetite for renewables, regulatory stability and revenue predictability (feed-in tariffs vs merchant), currency risk for non-eurozone countries, and local project finance market maturity. France and Germany benefit from all factors, while Italy and Romania face headwinds on most.

Which European countries have the lowest solar WACC?

France and Germany consistently show the lowest WACC (2.5-4.5% nominal for utility-scale), thanks to strong regulatory frameworks (CRE tenders, EEG), deep project finance markets, low sovereign risk, and long-term revenue visibility through contract-for-difference or feed-in premium mechanisms.

How does WACC affect LCOE?

Solar projects are capital-intensive with near-zero marginal costs. At 4% WACC, a 700 €/kWp project in southern France might achieve 32-38 €/MWh. At 7% WACC, the same project rises to 46-55 €/MWh — a 40-50% increase. This makes financing costs as important as hardware costs in determining competitiveness.

What are the data sources for European solar WACC?

Primary sources are AURES II (eclareon/DTU, 2020) which surveyed investors and developers across 12 EU countries, and IRENA Renewable Power Generation Costs 2023 for regional benchmarks. These are supplemented by ECB interest rate data and national regulatory databases (CRE, Bundesnetzagentur, GSE).