The era of safe, subsidised renewable-energy development in Europe is over, but that doesn’t mean funding for new projects has dried up. While it’s true that new wind and solar farms are exposed to more merchant and financial risk, 2025 saw more than €100 billion invested in new renewable capacity on the back of new demand from data centres, electric vehicles and air-conditioning during southern Europe’s increasingly sweltering summers. This investment surge made solar and wind the top source of electricity in the European Union in 2025, ahead of gas, accounting for 30 per cent of the bloc’s power supply, compared to 20 per cent just five years ago.

Still, new projects face a fundamentally different funding landscape. Whereas developers once secured 15- to 20-year loans backed by guaranteed tariffs, today’s sponsors must navigate compressed tenors, elevated equity requirements and rigorous risk assessment. That’s because there is a paradox at the heart of Europe’s growing demand for clean energy: too much of it can crash prices. Europe experienced more than 9,000 hours of negative power prices in 2025, a big jump over previous years. This volatility is attracting a fresh cohort of investors with a greater appetite for risk.

The new players
The decline in guaranteed revenues has drawn more diverse financial participants willing to embrace volatility for enhanced returns. Private equity and infrastructure funds, including Copenhagen Infrastructure Partners and Macquarie, have moved decisively upstream, assuming development risk and providing mezzanine capital that conventional banks eschew.

A striking development is the tech-energy convergence. Amazon is now the top corporate purchaser of renewable energy in Europe, having invested in more than 230 projects, while Microsoft is co-investing with Brookfield Asset Management to develop more than 10.5 gigawatts of capacity across the US and Europe. With their investments, tech companies are locking in supply and guaranteed prices.

Meanwhile, specialised flex funds are emerging to address grid stability. Triodos Investment Management, for instance, is one of several investment funds taking stakes in battery systems across Europe. By capturing and storing surplus electricity, battery energy storage systems (BESS) allow energy to be released during periods of high demand or when renewable generation is low, making power supplies (and prices) more stable and reliable.

“With energy storage, there’s a new and interesting asset class emerging, and the business model is fundamentally different to that of wind and solar,” says Goldman Sachs, whose GS Pearl Street platform finances energy storage projects across Europe. While renewable-energy assets generate revenues by selling electricity, energy storage makes money from trading the difference between low- and high-priced hours in the market. This makes BESS a potential hedge for players who already have classic renewable-energy portfolios, according to the investment bank.

While new players are injecting fresh capital and ideas, institutional investors remain central to the development of renewables. Last year, the European Investment Bank (EIB) funded one-fifth of newly installed solar capacity, one in three onshore wind projects and most offshore wind developments for a total of €9.8 billion.

The new terms
Traditional project finance structures have evolved markedly since the early 2020s, when the phaseout of guaranteed feed-in tariffs and other government support measures began to expose renewable-energy operators to market prices. Capital allocation has grown more selective, with lenders imposing shorter contract periods, or tenors, and applying more conservative lending criteria.

Without feed-in tariffs, commercial banks have shortened tenors to under 10 years. The EIB, on the other hand, has extended its lending periods, because it can. In addition to the bank’s AAA credit rating, the EIB boasts a due diligence team that many commercial banks can only dream of. “We have a very comprehensive team of engineers and economists and finance experts who review all the technical aspects of projects and ask all the difficult questions,” explains Isidoro Tapia, a loan officer at the EIB. “Because our due diligence is so thorough, it sends a positive signal to the market. It says this is a project worth funding.” Today, the EIB’s focus is on projects where technology risks are higher, such as large offshore wind farms. “The EIB’s participation helps to derisk these projects and attract other investors,” Tapia says.

Projects lacking contracted revenues now require substantially higher equity participation – a development the EIB views as having “a positive effect in the sense that this selects some of the best projects”. Corporate Power Purchase Agreements have emerged as the primary mechanism for mitigating merchant exposure. However, even with such contracts, lenders increasingly employ conservative forecasts for the actual earnings for wind and solar output, which can differ significantly from average wholesale price forecasts. The “capture price” of solar and wind installations is often below wholesale rates. This is because they tend to produce the most energy at the same time as do their competitors, which drives prices down – a phenomenon known as price cannibalisation.

To combat this effect, many financiers and corporate off-takers now require solar and wind installations to include battery storage. Projects with co-located storage receive preferential pricing and higher loan-to-value ratios, while pure-play renewable assets face more elevated capital costs.

 

Summary table: then versus now

Feature	Pre-2022 (stable)	2025/2026 (volatile)
Primary collateral	Government feed-in tariffs and price floors	Corporate power price agreements and merchant revenue
Loan tenor	15-20 years	5-10 years
Key asset	The wind turbine/ solar panel	The hybrid system (generating asset plus battery)
Lender focus	Energy output MWh	Capture price and price floors
New players	Retail banks	Infrastructure funds, private equity, Flex Funds, corporate off-taker investors

 

The open questions

For now, rising demand for electricity and strong political backing are underpinning a healthy pipeline of renewable-energy projects across Europe. But longer term, key questions remain: can ageing grids be adapted to manage ever-growing volumes of renewables, and if so when, at what cost, and who will pay? How will rising demand affect wholesale price volatility and financing costs? Can battery storage genuinely resolve the cannibalisation effect? And which European markets will emerge as the next investment frontiers?

To join the discussion on the evolving dynamics in European renewable-energy finance, register for the Solar + Wind Finance & Investment Summit Europe in Barcelona this September