PDF Publication Title:
Text from PDF Page: 043
As a result of the lack of data on the key determinants of project-level WACC – that is to say the cost of debt and equity, as well as the debt tenure and debt-to-equity ratio – for different technologies in different years, IRENA and others (e.g., the International Energy Agency)16 rely on broad WACC assumptions. By necessity, however, these miss the granularity inherent in project-level WACC’s and their differentiation by market, technology and year. While an average assumption for the project-level WACC is not necessarily a critical failing, it does mask what would otherwise be useful insights. Yet, the lack of data for even differentiated country-level technology WACC’s over the period 2010 to 2019 means there is a significant risk that at any given point, the simplistic WACC assumptions used become a poor indicator of real world conditions and hence bias the results. By way of example, Figure 1.14 presents the LCOE for offshore wind from the IRENA Renewable Cost Database of projects, plotted against the adjusted Auction/PPA price for the same project. The data is therefore a subset of the database where we have data for both these metrics. The Auction/PPA price has been adjusted to ensure that it conforms as closely as possible with the IRENA LCOE methodology. This requires an estimate of the value of the “merchant tail” of projects which have contracts that are shorter than their economic life. It also necessitates putting all values into real currency terms, for those whose strike prices are not indexed to inflation, or only partially indexed. When plotting the results, the implication is that for those projects which are significantly above or below the 45 degree line, the actual WACC experienced by the project has deviated significantly from the assumption made by IRENA of a real value of 7.5%.17 The data tends to suggest that in the early years of offshore wind deployment, more projects were around the 45 degree line or above, implying a WACC value exceeding the IRENA assumption of 7.5% for all years. This is perhaps to be expected, given that project developers had less experience in both developing and proving the ongoing performance of offshore wind projects. Banks would have taken this into account when pricing debt, while shareholders would have factored it in to hurdle rates for equity. Similarly, the relative lack of experience of financing institutions with offshore wind projects and their relative lack of understanding of the technology specific risks in operating wind farms offshore would likely have resulted in higher risk premiums to cover this uncertainty. In contrast, recent projects and those to be commissioned out to 2025 are clustered more tightly around the 45 degree line, implying that the WACC assumption of 7.5% is more reasonable today than it was for projects being commissioned between 2010 and 2016. Depending on market maturity, the situation for each technology and even country will differ, while the ability to collect sufficient data to extract meaningful trends would be a very resource-intensive task. This is the case for solar PV. The LCOE and PPA data in Figure 1.3 for utility-scale solar PV diverge materially from around 2016 onwards. This can, in part. be explained by selection bias, given that competitive procurement processes are by their nature likely to lead to lower prices. The order of magnitude of the difference, especially in 2018 and 2019, however, tends to imply that the anecdotal evidence supporting lower WACC's for solar PV than assumed in the LCOE calculations is having a material impact. To fill this significant data gap, IRENA proposes conducting a global survey of financial sector professionals on costs of capital for solar and wind technologies, in order to establish a reliable, replicable and well-documented database. The data collected through this survey effort will potentially add a new level of insight to IRENA Renewable Cost Database and analysis. It will also benefit IRENA’s member states and other stakeholders who need accurate cost of capital assumptions (e.g., regulators, researchers, energy system and climate modellers, etc.). The initial results of this exercise will be seen in Renewable Power Generation Costs in 2020, to be released in 2021. LATEST COST TRENDS 16 IRENA assumes a real WACC of 7.5% in OECD countries and China, and 10% elsewhere for all technologies. While the IEA, in contrast, assumes 8% in developed countries and 7% in developing countries (IEA, 2019). 17 It is also possible that the IRENA O&M assumptions might differ materially from project-specific values, but these will have a proportionately lower impact on LCOE values, meaning the majority of variation should be due to the WACC assumption. It does, however, imply that the comparison of individual projects may be of limited value and that a large body of data is needed to draw robust inferences about overall trends in WACC. 43PDF Image | RENEWABLE POWER GENERATION COSTS IN 2019
PDF Search Title:
RENEWABLE POWER GENERATION COSTS IN 2019Original File Name Searched:
IRENA_Power_Generation_Costs_2019.pdfDIY PDF Search: Google It | Yahoo | Bing
NFT (Non Fungible Token): Buy our tech, design, development or system NFT and become part of our tech NFT network... More Info
IT XR Project Redstone NFT Available for Sale: NFT for high tech turbine design with one part 3D printed counter-rotating energy turbine. Be part of the future with this NFT. Can be bought and sold but only one design NFT exists. Royalties go to the developer (Infinity) to keep enhancing design and applications... More Info
Infinity Turbine IT XR Project Redstone Design: NFT for sale... NFT for high tech turbine design with one part 3D printed counter-rotating energy turbine. Includes all rights to this turbine design, including license for Fluid Handling Block I and II for the turbine assembly and housing. The NFT includes the blueprints (cad/cam), revenue streams, and all future development of the IT XR Project Redstone... More Info
Infinity Turbine ROT Radial Outflow Turbine 24 Design and Worldwide Rights: NFT for sale... NFT for the ROT 24 energy turbine. Be part of the future with this NFT. This design can be bought and sold but only one design NFT exists. You may manufacture the unit, or get the revenues from its sale from Infinity Turbine. Royalties go to the developer (Infinity) to keep enhancing design and applications... More Info
Infinity Supercritical CO2 10 Liter Extractor Design and Worldwide Rights: The Infinity Supercritical 10L CO2 extractor is for botanical oil extraction, which is rich in terpenes and can produce shelf ready full spectrum oil. With over 5 years of development, this industry leader mature extractor machine has been sold since 2015 and is part of many profitable businesses. The process can also be used for electrowinning, e-waste recycling, and lithium battery recycling, gold mining electronic wastes, precious metals. CO2 can also be used in a reverse fuel cell with nafion to make a gas-to-liquids fuel, such as methanol, ethanol and butanol or ethylene. Supercritical CO2 has also been used for treating nafion to make it more effective catalyst. This NFT is for the purchase of worldwide rights which includes the design. More Info
NFT (Non Fungible Token): Buy our tech, design, development or system NFT and become part of our tech NFT network... More Info
Infinity Turbine Products: Special for this month, any plans are $10,000 for complete Cad/Cam blueprints. License is for one build. Try before you buy a production license. May pay by Bitcoin or other Crypto. Products Page... More Info
| CONTACT TEL: 608-238-6001 Email: greg@infinityturbine.com | RSS | AMP |