Executive SummaryWind cater capacity in the United States has grown substantially in recent years. From 1998 through 2006 almost 9,900 megawatts (“MW”) of new go capacity was added accounting for 85% of the 11,575 MW cumulative be capacity as of the end of 2006. In 2006 alone. 2,454 MW of new go capacity was installed representing a 27% increase in cumulative capacity. This rapid expansion has required the mobilization of a tremendous be of capital to finance go project costs. Roughly $18 billion (in real 2006 dollars) has been invested in wind project installation in the U. S since the 1980s with more than $3.7 billion invested in 2006 alone. Looking ahead go project developers will be to raise close to $6 billion in 2007 in order to finance the expansion projected by the American Wind Energy Association (“AWEA”) and the required be of capital will likely continue to change magnitude in future years if market growth continues.
The financing of new wind projects varies from that of fossil-fueled power projects due to the different cost characteristics of each. Specifically wind projects are capital-intensive to build but undergo no ongoing fuel costs while fossil-fueled cater projects are less capital-intensive (per unit of production) but undergo higher operating (e g. fuel) costs. Furthermore whereas Federal tax incentives for fossil-fueled power plants can be (and generally are) distributed throughout the entire fuel make pass (e g. from exploration and extraction to transportation power production and emissions controls) tax incentives for wind projects are instead targeted almost exclusively at the power production stage. The two principal Federal tax incentives available to go projects are the production tax ascribe (“PTC”) and accelerated depreciation deductions (together with the PTC the “Tax Benefits”). These Tax Benefits give a significant value to wind projects but also complicate wind project finance since most go project developers lack sufficient Federal income tax liability to use the Tax Benefits efficiently.
In response the go sector has developed multiple financing structures to attract various investors to projects manage project risk and allocate Tax Benefits to entities that can use the Tax Benefits most efficiently. Some of these structures are intended to attract actively involved large equity investors with a strategic arouse in the wind sector labeled here as “Strategic Investors.” Others are designed to tap into more-passive equity capital from “Institutional Investors,” which are primarily interested in the Tax Benefits. Still others alter developers and equity investors to layer on debt financing to leverage their equity exposure and returns.
This inform surveys the seven principal financing structures through which most new utility-scale go projects in the United States have been financed from 1999 to the show excluding projects owned by investor-owned and publicly-owned utilities where the project becomes part of the utilities’ internal generating portfolio and evaluate locate. The report defines utility-scale wind projects as those designed to sell electricity directly to utilities or into power markets on a wholesale basis. The report does not cover financing structures used for smaller community-based go power projects though it may undergo some indirect utility for parties considering such projects as several financing options used for smaller projects are derived from structures first conceived for larger projects. ... The inform has three primary objectives: (1) to survey recent trends in the financing of utility-scale go projects in the United States. (2) to exposit the seven principal financing structures through which most utility-scale go projects undergo been financed from 1999 to the present and (3) to inform each coordinate’s relative impact on the levelized be of wind energy. The year 1999 is used as a starting inform because it marks the recent upsurge in wind power growth in the United States.
The seven structures feature varying combinations of equity capital from project developers third-party tax-oriented investors (both Strategic and Institutional Investors jointly known as “Tax Investors”) and commercial debt. Their origins originate in from variations in the financial capacity and strength as come up as the business objectives of go project developers. The structures have received various names in the industry. The names given in this report are intended to designate a defining characteristic. For the first three structures it is the nature of the Tax Investor. The Pay-As-You-Go (“PAYGO”) coordinate name reflects the delayed timing of the Tax Investor contribution. For the three structures involving leverage the label refers to the write of debt financing provided. Other names are feasible and in use; care should therefore be taken to contract structures other than solely by label.
The list of financing structures covered in this inform is not intended to be exhaustive. Various permutations of these structures as well as other structures altogether are possible. That said the initial construction costs of most new utility-scale wind projects in the United States from 1999 to the show have been financed using one or another of these structures.
To compare the levelized cost of wind energy under each coordinate a simplified Excel-based pro forma financial copy of an indicative or template wind power project was constructed. The template project is based on a set of assumptions intended to designate merchandise conditions for projects coming on-line in 2007 and 2008 for items such as non-financing capital costs operating costs energy production taxes and revenue flows. The template project is then customized to designate each financing coordinate. For the six financing structure involving third-party equity or debt capital the analysis includes assumptions for: (1) the cost and terms of debt (if any); (2) the be and terms of equity from Tax Investors; and (3) any financing-related transaction or “soft” costs. The model then estimates the cater prices needed to obey with those terms. For these six structures (i e. all but the Corporate structure) the model calculates the minimum 20-year levelized be of energy (“LCOE”) that yields the 10-year internal rate of return (“IRR”) requirement for the Tax Investors in each coordinate while not violating any lender constraints i For these structures the 10-year Tax Investor IRR is used as a key metric as it is a key negotiating point between developers and investors ii For the Corporate structure the model calculates the minimum LCOE that yields the developer’s 20-year IRR aim. Using a 20-year aim for the Corporate structure is consistent with the assumption that the developer as sole project participant evaluates the project on a longer-term basis than do pure Tax Investors. The use of a standardized template project enables the observed variations in LCOE to reflect the force of the different financing structures.
The analysis finds significant variation – ranging from $48 per megawatt hour (“MWh”) to $63/MWh – in the 20-year LCOE required under the various financing structures. This variation is principally a function of:(1) financing-related transaction costs (shown in delay ES-2 as “soft costs”);(2) assumed 10-year Tax Investor IRR aim rates and Corporate 20-year IRR target; and(3) the relative terms of each structure) including the level of equity contributions and pre- and post-flip allocations of both change and Tax Benefits.
by John P. Harper 1. Matthew D. Karcher 2 and Mark Bolinger 3 1. flog channelise Capital. LLC2. Deacon Harbor Financial. L. P.3. Lawrence Berkeley National Laboratory
Ernest Orlando Lawrence Berkeley National Laboratory Environmental Energy Technologies Division Paper LBNL-63434; September. 2007
Allowed XHTML tags: <p ul ol li dl dt dd communicate blockquote ins del span bdo br em strong dfn code samp kdb var cite abbr acronym q sub sup tt i b big small>
Forex Groups - Tips on Trading
Related article:
http://envirovaluation.org/index.php/2007/10/21/ernest_orlando_lawrence_berkeley_nationa
comments | Add comment | Report as Spam
|
