Economic Analysis, Modelling and Financing for Renewable Energy

What You Will Learn?

• Incorporate energy storage and battery analysis in analysis of renewable energy from an energy storage perspective and from an ancillary service point of view
• Learn practical tools to analyse renewable energy including efficient tools to work with wind, hydro and solar data; creating flexible scenario and sensitivity analysis to evaluate resource risk, construction risk, O&M risk and debt structuring; developing techniques to resolve circular references related to funding debt and sculpting debt without copy and paste macros.
• Understand the implications of project finance features in the context of renewable energy (sculpting, debt funding, debt size, DSCR, DSRA, debt tenor, re-financing) on costs and equity returns from renewable energy.
• Develop efficient ways to quickly compute the levelised electricity cost of different technologies using carrying charge factors and alternative financial models.
• Work through resource assessments and compute probability of achieving different levels of production (P90, P75 etc.) using hands-on exercises for different types of projects in order to effectively review consulting studies.
• Create flexible and transparent financial models of renewable energy from A-Z that incorporate resource risk, financing structure, tax treatments, alternative pricing policies and other factors.
• Evaluate the economics of renewable energy (including ancillary services) in the context of merchant markets and review the structure of corporate PPA contracts.

Understand project finance & energy renewable investments with this week-long course.

Agenda

SESSION 1: SOLAR AND VALUE DRIVERS, APPROPRIATE LCOE CALCULATION AND RECONCILIATION WITH FINANCIAL MODEL

• Overview of Renewable and Storage Value Drivers with Focus on Solar Energy
  • Value Drivers for Solar Energy
  • Calculation of LCOE from Value Drivers
  • Importance of Financing Cost and Target IRR
  • Carrying Charge Factor and PMT
  • Setting-up LCOE for Alternative Characteristics
• Drivers of Value in Solar Energy Projects
  • Resource Assessment, Yield and Capacity Factor from Satellite Data
  • Basic Concept of Performance Ratio
  • Evaluating Resources in Different Places and with Tracking
  • Module and Other Capital Costs
  • Operating and Maintenance Cost Categories and Benchmarking
• Reconciling LCOE with Operating Section of Project Finance Model
  • Setting up a Flexible Timeline
  • Modelling Operations with Degradation and Alternative Resource
  • Using Real and Nominal Prices
  • Computing Project Returns
  • Incorporating Debt
• Economic Analysis of Intermittant Power Versus Dispatchable Power
  • Understanding Short-Run versus Long-Run Costs
  • Incorporating Cost of Natural Gas in Cost Analysis
  • Comparing the Levelised Cost of Solar to the Variable Cost of Natural Gas
  • Comparing the Levelised Cost of Solar to Merchant Prices
  • Break-Even Cost of Storage in Comparing Solar to Dispatchable Sources

SESSION 2: WIND AND SOLAR AND ANALYSIS OF UNCERTAINTY

• Introduction to Resource Uncertainty and Financing
  • Concept of P50, P90, P99 etc. and Downside Cases for Financing
  • Case Study with Alternative Term Sheets
  • Understanding the Fundamental Mathematics of P50, P90, P99 and NORMINV Function
  • Application of P90 in Debt Sizing with Different Standard Deviation Assumptions in Simple Model
• Case Study: Details of Solar Resource Analysis
  • Interpreting PVSYST Output and Performance Ratio
  • Sizing of Inverter
  • Performance Ratio and Temperature with Hour-by-Hour Analysis
  • Uncertainty Estimates in PVSYST
  • Computing Uncertainty from Monthly Solar Variation
  • Addition of Uncertainty from Variance that is Independent
• Case Study: Wind Resource Analysis
  • Power Curve and why Hour-by-Hour Wind Profiles Are Necessary
  • Estimates of Energy Production from Power Curves
  • Uncertainty in Wind and Uncertainty in Energy
  • One-year versus 10-year or 20-year P50, P90, P99
  • Computing Resource Uncertainty from Estimates of Standard Deviation
• Understanding Renewable Term Sheet and Applying Concepts in Financial Model
  • Case Study on Banking Analysis
  • Detailed Term Sheet Review
  • Debt Sizing versus Estimates of IRR in Financial Models
  • Sculpting with Different Resource Estimates
  • Incorporating Debt to Capital Constraint versus DSCR Constraint

SESSION 3: PROJECT FINANCE, DEVELOPMENT FEES, RE-FINANCING AND ASSET SALE UPSIDES IN RENEWABLE ENERGY

• Measurement of Value and Risk using Project Finance
  • Debt Capacity and Changes in Risk for Different Projects
  • Problems with WACC in the Context of Renewable Energy with Changes in Risk
  • Changes in the Capital Structure with Project Financing
  • Debt Capacity for Hydro and Geothermal
• Debt Capacity and Project Finance Terms
  • Effects of Debt Service Coverage Constraint versus Debt to Capital Constraint in Sizing Debt
  • Debt Service Coverage Ratio Definition and Targets
  • Debt Tenor, Alternative Repayment Structure, Average Life
  • Credit Spreads and Target Credit Ratings in Project Finance
  • Debt Service Reserve and Maintenance Reserve
  • Covenants, Cash Flow Sweeps and Subordinated Debt
• Project Finance Valuation and Upside from Selling Assets in Renewable Energy
  • Project IRR to Screen Projects
  • Equity IRR to Structure Projects
  • Minimum Required Equity IRR for Different Renewable Projects
  • Earned IRR from Selling Assets when Risk Declines
  • Modelling Alternative Estimates of Value with Alternative Risk Profile Changes
  • Modelling Different Holding Periods and Optimising IRR
• Re-Financing for Renewable Projects
  • Types of projects where re-financing is important – off-shore wind, wave energy, merchant hydro projects and geothermal
  • Effects of re-financing on equity IRR and difficulty of defining the equity IRR with short-debt duration
  • Structuring project finance models and analysis to measure the effect of re-financing on equity returns
• Development Costs, Risks and Fees in Renewable Projects
  • Development Time Frame and Costs in Wind and Solar Projects
  • Exploration Costs and Time Frame in Geothermal Projects
  • Fees and Compensation for Development and Treatment of Development Fees when Computing
  • Equity IRR.
  • Probabilities of Proceeding Beyond Development
  • Compensation for Development Costs
• Modelling Exploration and Development Options – Geothermal Case
  • General Cost and Resource Parameters for Geothermal Projects
  • Review of Project Finance Model for Geothermal Project
  • Exploration and Development Cost, Probability Time Frame
  • Segregating Development Phases
  • Discount Rates for Different Stages

SESSION 4: BATTERY STORAGE ANALYSIS WITH RENEWABLE ENERGY

• Overview of Storage in Renewable Project Finance
  • Objective of Storage Analysis – Economic and Financial
  • Can Solar and Storage Compete with Other Technologies
  • Renewable Energy Intermittency and Unavailability
  • Battery Storage Duration and Cycles
  • Use of Batteries for Ancillary Services
  • Use of Batteries for Bulk Power Storage
  • Other Uses of Batteries
• Battery Characteristics and Economic Analysis
  • Cost as a Function of both Storage Capacity and Charging/Discharging Capacity
  • Trend is Costs and Learning
  • Battery Life and Cycles
  • Operating and Maintenance
  • Battery Degradation and Effects on Cost
  • Round Trip Efficiency
  • Depth of Discharge
• Measuring the Cost and Benefits of Batteries
  • Application of levelised cost concepts to the carrying charges of batteries with different characteristics
  • Combining the discharge of batteries and renewable resource to compute the total energy produced
  • Incorporating round trip efficiency in the analysis of batteries and solar
  • Computing the total cost of batteries and storages
  • Comparing the total cost of storage and renewable to other strategies
  • Incorporating the cost of dispatchable technologies in the analysis for comparison
• Batteries and Storage in Project Finance Models
  • Background on Probability of Default and Loss Given Default
  • Definition and Calculation of DSCR
  • Use of DSCR in Base (P50 Cases) and Downside (P90, P95 Cases) in Determining Debt Capacity
  • Application of LLCR and PLCR
• Contract Structuring in Batteries and Renewable Project Finance
  • Importance of EPC Contract in Different Projects (Off-Shore Wind and Hydro)
  • Performance Contracts in Solar Projects
  • Power Curve and Availability Guarantees in Solar and Wind Projects
  • O&M Contracts and Warranties
  • Insurance
  • Counterparty Risk in Different Projects
  • Battery Contract Structures
  • Battery Capacity Contracts
  • Battery Lease Structures

SESSION 5: CORPORATE PPAS AND HYDROGEN

• • Corporate PPAs and Merchant Pricing Overview
    • Background on Merchant Prices in Different Regions
    • Drivers of Merchant Prices and Implied Heat Rate
    • Alternative Corporate PPA Structures
    • Forward Prices and Corporate PPAs
    • Merchant Price Risk in Corporate PPAs
    • Evaluation of Value at the End of the Corporate PPA
  • Hydrogen Overview – Grey, Blue and Green
    • Current and Future Uses of Hydrogen
    • SMR and Grey Hydrogen from Natural Gas
    • Electrolysis and Green Hydrogen
    • Efficiencies of Grey, Blue and Green Hydrogen
    • Energy Costs of Creating Hydrogen
    • Inclusion of Emission Cost in Energy Costs
    • Understanding of Fuel Cells
  • Economic Analysis of Hydrogen
    • Challenge – Lifetime of Stack versus Lifetime of Other Equipment
    • Challenge – Degradation on Energy Used
    • Levelised Cost Comparison of SMR and Electrolyzer Including Compression
    • Modelling the Cost of Alternative Strategies Including Only Running Electrolyzer During Solar Production Periods
  • Hydrogen Downstream Costs
    • Added Costs of Hydrogen – Compression, Storage, Transport, and Dispensing
    • Evaluation of the Costs of Each Item Using Different Drivers
    • Distribution Strategies and Revised Comparison of Electrolyzer with SMR Using Alternative Storage and Distribution Strategies
    • Methods of Summing Costs
  • Total Cost of Ownership from Hydrogen Versus Battery and Internal Combustion
    • Case of Trucks and Buses – Accounting for Efficiency, Life and Use
    • Illustration of Battery Versus Internal Combustion
    • Case Study of Garbage Trucks to Compute Total Cost of Ownership.
    • Alternative Distribution Strategies and Total Cost of Ownership

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