Today it is more difficult to build renewable energy projects. This is why

The wind that blows across the agricultural lands of northern Germany brings many things to the town of Sprakebuell: fog and rain from the sea, the occasional migrating stork, the faint smell of manure in freshly fertilized fields.

And perhaps best of all: the money, coming from the sale of electricity generated by the wind turbines that adorn the flat, green fields that stretch to the North Sea. Some of the money goes to the villagers themselves, and local acceptance makes this windy agricultural enclave near the Danish border a showcase for forms of move forward with renewable energy projects.

It’s not easy when the headwinds of the post-pandemic global economy, including high interest rates and inflation, are holding back often costly investments in wind, solar and other forms of clean energy.

That is slowing down the growth in renewable energy necessary to defend against climate change, just as it must be accelerated to achieve an ambitious goal achieved in the UN climate summit to boost clean energy capacity.

But Sprakebuell, a three-street cluster of elegant one-story houses where tractor traffic outnumbers automobiles, has taken on new life and added prosperity thanks to renewable energy. However small, some of the German city’s practices offer lessons that could resonate globally.

Dividends from citizen-owned wind farms do not enrich those who receive them. Rather, the money is a little extra clink, a financial cushion “that is very important for us because it gives us a certain freedom,” said Astrid Nissen, 44, who with her husband runs a 150-cow dairy farm in the Outskirts of town.

Milk prices fluctuate wildly, but more stable income from wind farms is “something we can rely on, something we can use to plan,” she said, with occasional moos coming from the barn behind her.

The hiss, hiss, hiss of the turbines (inaudible in the center of town but loud up close) brings in about 400,000 euros (more than $432,000) a year in taxes. This paid for a new playground, a bike path and even free piano lessons for the children of Sprakebuell.

When it comes to new projectsglobal obstacles include higher borrowing costs that make it more expensive to finance projects, high prices and clogged supply chains for wind turbines and blades, and “not in my backyard” resistance to wind farms.

#Wind and #Sun are free, but today it is more difficult to build renewable energy projects. #Climate Crisis #RenewableEnergies

Interest rate increases by the US Federal ReserveThe European Central Bank and other economists at University College London warn of “green collateral damage” and call high borrowing costs aimed at fighting inflation “terrible news for the green transition.”

Consulting firm Wood Mackenzie concluded that “clean energy has seen one of the most difficult years in its short history”, with governments calling for more unmet generation capacity in Germany, Spain, the UK and Italy.

The situation is even more serious for low-income countries in places like Africa, where borrowing costs for the higher upfront investment needed for renewables were already high and have risen further.

In Sprakebuell, the number of family farms has shrunk from 26 in 1960 to three larger ones today, and it was on the verge of merging with a neighboring town 30 years ago. Today, they are not only home to farmers, but also to people who work half an hour away in the city of Flensburg.

Sprakebuell residents contributed 20% of the down payment for the construction of a wind farm and local banks lent the remaining 80%. The first wind farm had 24 participants; the last one had over 150 as word spread.

Nissen and her husband started with an investment equivalent to just over 5,000 euros ($5,560) more than 20 years ago. The dividends helped pay for a new calf barn, a front-end loader for removing animal feed and two workers.

“That means that sometimes we have a weekend off, sometimes a vacation, and without employees that is impossible,” he said.

Not everyone participates, but all residents see the benefits. In the city center there is a shared electric car that anyone can reserve via a smartphone app for 2.50 euros per hour. A small grocery store with an attached cafe has opened and a restaurant serves daily lunches, signs of new purchasing power. Some villages of similar size in the region have neither.

“Renewable energy projects are visible in the landscape and it is very important to me that the local population can identify with these projects,” said Christian Andresen, whose company, Solar-Energie Andresen GmbH, developed the wind farms and solar installations.

Andresen’s projects illustrate factors that can advance renewable energy. one is the Guaranteed electricity price by the German government for 20 years, giving banks confidence that they can lend and get the money back.

Another is low-interest loans from the government development bank, KfW. But even those rates have increased, from 1% a few years ago to more than 5%, Andresen said.

High interest rates hold back renewable energy much more than fossil fuel projects. Most of the cost of renewable energy is included in the purchase price of wind turbines or solar panels, while the costs of running them in the future are negligible: the wind blows and the sun shines for free.

That makes the cost of the loan a much more important factor in determining whether the project will be profitable.

The opposite happens with fossil fuels: a natural gas fueled power plant It is relatively cheaper to build, while the real costs come later with the purchase of the gas.

Added to this is inflation, which has raised the cost of building facilities, and equipment shortages due to clogged supply chains.

These were some of the reasons cited by the Danish company Orsted when canceled two large wind facilities off New Jersey. Swedish company Vattenfall also halted an offshore project in the UK.

The S&P Global Clean Energy index of stocks of companies with clean energy-related businesses has fallen 26% over the past year, even as broader market indexes have hit records.

In the United States, higher rates have been a “blow” for some renewable energy projects, said David Shepheard, North American energy and utilities partner at global consulting firm Baringa. “Yields are depressed in the current rate environment,” but they are improving, he said, and the Federal Reserve is expected to cut rates three times this year. The bigger picture is nuanced: A slowdown in renewables by Big Oil eases supplier logjams, while domestic content requirements for U.S. subsidies increase supply chain delays for some projects.

In sub-Saharan Africa, where half the population lacks access to electricity, renewable energy projects face even greater financing challenges. With lots of sun, Solar energy is an obvious choice.but Africa’s 1.2 billion people have a fifth of the solar energy of cloudy Germany.

Borrowing costs are much higher there than in rich countries, while government subsidies are uncertain due to political upheaval and countries already heavily indebted.

In Nigeria, where Blackouts are an everyday event. For about half of the country’s 213 million people, some 14 solar projects have stalled because finances don’t add up.

The government has been wary of World Bank credit guarantees that would make the projects bankable, worried about having to pay for power even if the grid can’t supply it.

But without that, “no one will develop or finance a project with a government subsidy because it can dry up,” said Edu Okeke, managing director of energy company Azura, one of the parties interested in the Nova solar project in Katsina state, in the northern Nigeria.

The answer may be to increase the price of electricity, something the German government did last year by 25%. That also helps secure financing. Another is subsidized interest rates or credit guarantees as part of developed countries’ efforts to help poorer nations combat climate change.

And when the owners are locals rather than big energy companies, objections to wind towers’ appearance, shadows or whistling tend to fade, said Andresen, the wind developer.

“When I have a turnout, there’s a nice noise and a nice view,” he said.

AP writer Taiwo Adebayo in Abuja, Nigeria, contributed to this report.

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