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