European Clean Energy Investment Guide 2012

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Cost:
In solar PV systems, the single most important cost item is
the upfront capital expenditure. In the graphical depiction,
it is assumed that 1600€/kWp is the minimum, which
receives maximum score. Cost drivers are the choice of
modules, mounting system (fixed vs. tracking system),
transport, installation, as well as land rental.
The other two dimensions relate to the context of the
project as follows:
Country risk:
The success of a project and its prospects for investment
very much depend on country-specific aspects, particularly
political and credit risk. In the graph, we score 10/10 for
countries with a high level of political stability and a top
credit rating. In this crude and simple tool, the score is
naturally subjective. It should capture both risk and the
impact of existing mitigation strategies.
Infrastructure:
Key to a successful project is the presence and accessibility
of appropriate infrastructure, specifically road access and
grid access (or connection of off-grid consumers). This is
a separate dimension, as in most instances it presents a
third-party dependency. Whilst projects may not compete
for land, they often compete for resources to build the
required lines to the injection point or to strengthen the
grid. This may be obvious for offshore wind projects, but
it is equally important for utility-scale solar projects,
particularly in remote desert areas that may have the
desired irradiation, but not much else.
One dimension that we have deliberately omitted is size
of the project. Of course, size is important, not least because
of economies of scale and financing options. For instance,
non-recourse project finance is only available for large
projects. Size may affect the quality of a project indirectly
via size-dependant tariff bands, costs or lack of available
risk mitigation options (such as political insurance), but is
not an independent dimension.
Illustration
For the purpose of illustration, we are comparing a project
in Germany with one in Zambia. The graph above shows
the scores along those axes. The larger the resulting area, the
better the opportunity might be.
The axis of the energy yield points to the top, costs and tariff
to the right while the context- related dimensions point to
the left. In other words: Pure economics increase the area to
the right whilst third-party dependency varies the area on
the left.
In Germany, we are faced with a low specific energy yield of
900kWh/kWp and a tariff of 13.5€c/kWh (April 2012, ground
mounted) for 20 years. We have assumed costs to be at the
lower end (i.e. 1,600 €/kWp). A stable political environment
and law governing grid connection account for the 9/10
scores along the risk and infrastructure dimensions.
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The fictional project in Zambia, on the other hand, enjoys
more than twice the specific energy yield of Germany. This
high yield, combined with a comparable price of 15€c/kWh
(assumed) increases the project graph on the revenue side.
However, this is partially offset by a higher cost assumption
(including higher transport costs), higher political risk and
higher risk of infrastructure not being in place.
Interestingly, the areas of the resulting project shapes
are similar in size. Not surprisingly, the Zambia project
shape is in the top right hand corner while the German
project shape sits much more at the bottom of the graph.
In other words, one project is high on revenue, while the
other project is low on risk. This demonstrates a common
dilemma in project development of solar PV projects:
The high energy yield enjoyed in many countries near
the equator in Africa, South Asia and South America
is partially eaten up by higher costs, low credit ratings,
political risk and a lack of infrastructure.
Although this graphical project quality estimator has
been presented for solar PV projects, its principles can be
applied to other renewable energy projects with slight
modifications. For instance, in wind energy, operating
costs would have to be taken into account.
Green Rhino Energy
Project Development Analysis & Evaluation Supporter
Website:
Contact:
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Email:
Telephone:
www.greenrhinoenergy.com
Joachim Baumgaertner
Managing Director
joachim@greenrhinoenergy.com
+44 7834 771507
Green Rhino Energy is an independent specialist
consultancy providing expert, strategic advice in the
renewable energy sector. We bring together technology
and finance to best effect. Clients include project
developers, investors and cleantech companies. We
also act as co-developers of utility-scale solar power
projects in emerging markets. Based in London,
Green Rhino Energy was founded in 2009 by Joachim
Baumgaertner.
We help clients assess the viability of new
technologies, identify sources of finance and undertake
thorough risk assessment. We recently developed
a renewable energy project finance tool for a
development bank in Latin America.
We evaluate, develop and plan large-scale solar
power plants worldwide and can support sponsors,
landowners, financiers and developers across the
whole value chain. Green Rhino Energy is currently
involved in the development of solar power projects in
Bosnia-Herzegovina, Sri Lanka, Lesotho and Namibia.
Green Rhino Energy