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New clean energy power sites typically require some form of project finance. Clean energy project such as solar farms, wind farms, geothermal plants, waste-to-energy facilities or water-driven projects all involve large upfront capital costs (to source land, construct facilities and broadly build infrastructure) followed by a medium term to long term series of returns (through sale of generated power). Project finance typically involves a combination of equity capital and debt capital. Project finance has a long history in multiple industries such as telecommunications, transportation and mining. Investor returns and debt interest are driven substantially from the project's operational returns therefore appropriate financial modeling is essential. Fundamental to any project finance for clean energy project is an Energy Purchase Agreement (EPA), also known as Power Purchase Agreements (PPA), being a multiple year contract issued by a utility entity. The EPA / PPA, of five to forty years duration, contains all terms and conditions by which the utility entity agrees to purchase power produced by the clean energy power plant. |
Did you know?■ $108bn of clean energy projects financed in 2007 ■ Wind led 2007 ($39bn, 21GW). Solar & biofuel projects $17bn-$18bn each ■ Solar is the fastest growing clean energy ■ Europe attracted 50%+ of 2007 clean project finance (as per prior years) | |||||||||
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