Project development under the RO Colin Palmer Wind 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 year Debt repayment 6.0% over 20 year £100k £70k Large projectAnnual opex£30k Return to equity 15%£45k Risk premium35% Annual cost 15%£30k

Capital intensity Capex £1 million/MW Output (good site) 3 GWh/MW ( = 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?

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