The Big Question
Key executives weigh in on worldwide renewable energy issues
We start with the biggest cost of all: the cost of fnancing a solar project. Unlike
obvious costs like modules or inverters, fnancing costs are invisible to the
human eye, but are nonetheless the single biggest expense when considering the
30-year life of a solar project.
Driving down the cost of capital in project fnance transactions would be a
boon for the solar industry. By enabling solar developers to pull more of their
own, expensive, capital out of projects and substitute in cheap debt, we see an
opportunity for substantial value creation.
How to achieve this? We combine the power of big data analytics with strong
insurer balance sheets to guarantee the energy output of solar projects, thereby making the projects safer for lenders. By transferring the risk of solar project
performance away from the project, we can make solar projects truly bankable.
It is critical for renewable energy project developers to avoid a mismatch
between project costs refected in their bid prices for long-term off take agreements (such as PPAs), and the actual project costs. Any mismatch could lead to
underperforming projects or worse yet, a failed renewable project. To avoid the
mismatch, the developer should dedicate the suffcient resources (both time and
money) to conduct due diligence and identify and quantify each individual cost
for the different project elements. The identifcation typically comes from site
studies and meetings/securing bids from suppliers, including an honest discussion with suppliers about pricing and what could affect the fnal contract price.
How do you drive down project
costs when building a renewable
energy power plant?
Bids for projects rarely come in at the costs that developers are looking for. New technology
is expensive, not to mention risky (read: costly to fnance and insure) but utilities won’t buy
renewable power unless it is economically viable. How do developers and suppliers solve those
problems? We turned to project developers, fnanciers and supply chain vendors to weigh in.
Read the responses below to hear how they answered our big question this month: How
do you drive down project costs when building a renewable energy power plant?