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Project development under the RO
Colin PalmerWind Prospect Group
ESRC: Where next for wind? University of Bath 9 May 2008
Capital intensity
What’s a PPA?
Financing factors
PPA risk profile
Contracts and barriers
Capital intensity
Capex approx £1 million/MW
Output (good site) 3 GWh/MW
Opex £10 to £15 /MWh
7.5% over 10 yearDebt repayment6.0% over 20 year
£100k£70k
Large projectAnnual opex £30k
Return to equity 70:30 @ 15% £45k
Risk premium 35%
Annualcost
80:20 @ 15% £30k
Capital intensity
Capex £1 million/MW
Output (good site) 3 GWh/MW (2.5 - 3.5 = UK range)
Opex £10/MWh
Cost of Energy
Long term, low risk money £43/MWh (£52 - £37)
Medium term, medium risk money £59/MWh
NFFO4 bids around £30/MWh (£35 in £2008)
A way to make the RO debt financeable
Needs a generator and a supplier
Secured on the supplier’s balance sheet
Suppliers are big players who need ROCs
So, they are utilities
Can ‘go short’ with equity finance
What’s a PPA?
What’s a PPA?
Political
Market
“Market”
Risk> £100/MWh
PPA risk profile
Sets cover ratio thus gearing and financing cost
Monthly Output Variability
PPA risk profile
Max range 5:115 year average
PPA risk profile
PPA Floor price
Strength of counter-party
Technology supplier and warranty
EPC or multi-contract?
Energy yield and P90
Financing factors
Annual Variability
P50
P90 10 year
P90 one year
Financing level
Financing factors
Planning and all that
Connection agreement
Construction agreement
PPA
Financing
Contracts and barriers
Or why only big players can do wind in the UK
Bonanza for the big utilities