Economics and Financing of RES

2. Unit 3
Concepts of economic attributes
Part 1:
• Calculation of unit cost of power generation :from
different sources with examples, different models
and methods,
• Social cost – benefit analysis of renewable energy
technologies
• Financial feasibility evaluation of renewable energy
technologies,

3. Part 2:
• Technology dissemination models,
• Volume and learning effects on costs of renewable energy
systems,
• Dynamics of fuel substitution by renewable energy
systems and quantification of benefits

4. Power Generation Cost Analysis
and Support for Renewables

5. Costing….
WHY?
HOW?
WITH WHOM?

6. Rationale and Goals
• Renewable energy can meet policy goals for secure,
reliable and affordable energy and access.
• Lack of objective and up-to-date data is a barrier
• Decision making based on: outdated numbers, opinion
• Goals:
 Assist government decision-making, allow more ambitious policies
 Fill a significant information gap

7. LCOE Ranges and Averages
7

8. Levelised cost of electricity by country/region
Note: assumes a 10% cost of capital 8

9. Hydropower
• Mature technology, flexibility in design in many cases
• Lowest cost electricity of any source in many cases
• Importance will grow with penetration of variable RE
9

10. The LCOE of Wind
© IRENA
2013 11
Higher
capacity
factors from
improved
technology
Wind
turbine cost
reductions

11. PV modules prices
12

12. Learning rates for PV modules
2013
13
Source: Bloomberg New Energy Finance, February, 2011 and IRENA

13. An Emerging/persistent issue: Balance of
system costs?
14
Source: Seel, Barbose and Wiser, 2012

14. Diagnosis for support policies
14
• The patient is very healthy
Technology improvements, capital costs reducing ->
LCOEs falling
• But growing pains may be experienced
Rapid growth can lead to significant supply/demand
imbalances
• Suggested treatment is very patient specific
Trade-offs involved, depends on market, technology and
scale
• Preventative measures can be highly effective
Future proofing policies is challenging, but necessary
• Further basic research required
A lot of data exists, but it is typically not collected, IRENA to change this

15. Rationale and Plans
15
• Analysis to date has been based on low hanging fruit
• Engage with business: The Alliance will work at a technical
level on data and its availability
• Alliance members share, confidentially, their data on real
world project costs
• Entirely voluntary, we work together for mutual benefit
• Establishment period now, offical launch at Assembly
• Goals:
 more data, better data, a greater focus on analysis of data

16. Structure
16
Member countries:
Steering group for costing analysis focus
One workshop a year
Must nominate institution to deliver data
Quarterly newsletter
Alliance Members:
Provide data, confidentially
One workshop a year
Ability to query the database in detail
Quarterly newsletter
Observers:
Quarterly newsletter
Mailing list for new publications/analysis

17. 17
Renewable are increasingly
competitive, but more
needs to be done to fulfill
their potential…

18. Electricity
As electricity demand grows modestly, the primary
drivers for new capacity in the Annual Energy Outlook
2020 (AEO2020) Reference case are retirements of older,
less-efficient fossil fuel units; the near-term availability
of renewable energy tax credits; and the continued
decline in the capital cost of renewables, especially solar
photovoltaic. Low natural gas prices and favorable costs
for renewables result in natural gas and renewables as
the primary sources of new generation capacity through
2050. The future generation mix is sensitive to the price
of natural gas and growth in electricity demand.

19. • Electricity generation from natural gas and renewables
increases as a result of lower natural gas prices and declining
costs of solar and wind renewable capacity, making these fuels
increasingly competitive
0
1,000
2,000
3,000
4,000
5,000
6,000
2010 2020 2030 2040 2050
2019
history projections
Electricity generation from selected fuels
billion kilowatthours
natural gas
renewables
nuclear
coal
36%
38%
12%
13%
19%
19%
37%
24%
0
500
1,000
1,500
2,000
2,500
2010 2020 2030 2040 2050
Renewable electricity generation, including end use
billion kilowatthours
2019
history projections solar
wind
geothermal
hydroelectric
other
46%
38%
14%
33%
37%
7%
15%
3%
5%
2%
19

20. Electricity demand grows slowly through 2050
-1
0
1
2
3
4
5
1990 2000 2010 2020 2030 2040 2050
Percentage growth (three-year rolling average)
2019
history projections
High
Economic
Growth
Reference
Low
Economic
0
400
800
1,200
1,600
2,000
1990
2019
2050
1990
2019
2050
1990
2019
2050
1990
2019
2050
Electricity use by end-use sector
billion kilowatthours
direct use
electricity
sales
residential industrial
commercial transportatio
20

21. • Although near-term electricity demand may fluctuate as a result of year-to-
year changes in weather, trends in long-term demand tend to be driven by
economic growth offset by increases in energy efficiency. The annual growth
in electricity demand averages about 1% throughout the projection period
(2019-2050)
• Historically, although the economy has continued to grow, growth rates for
electricity demand have slowed as new, efficient devices and production
processes that require less electricity have replaced older, less-efficient
appliances, heating, ventilation, cooling units, and capital equipment.
• Electricity use in the High Economic Growth case grows 0.3 percentage
points faster on average, and electricity use in the Low Economic Growth
case grows 0.2 percentage points slower.
—with increases occurring across all end-use sectors
21

22. • The growth in projected electricity sales during the projection period would
be higher if not for significant growth in generation from rooftop
photovoltaic (PV) systems, primarily on residential and commercial
buildings, and combined-heat-and-power systems in industrial and some
commercial applications
• Electric power demand from the transportation sector is a very small
percentage of economy-wide demand because electric vehicles (EVs) still
represent a developing market
22

23. • An increasing share of total electricity demand is met with
customer-owned generation, including rooftop solar
photovoltaic
23
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
0
1,000
2,000
3,000
4,000
5,000
6,000
2015 2019 2030 2040 2050
history projections
Electricity generation, end-use solar photovoltaic share billion kilowatt-hours
percent share
end-use solar
photovoltaic
share of
generation
end-use PV
generation
other end-use
generation
electricity
generation from
the power sector

24. 0
500
1,000
1,500
2,000
2,500
3,000
1990 2010 2030 2050
2019
history projections
Electricity generation from
selected fuels
billion kilowatthours
natural gas
coal
nuclear
renewables
0
500
1,000
1,500
2,000
2,500
3,000
2015 2050
2019
projections
0
500
1,000
1,500
2,000
2,500
3,000
2015 2050
2019
projections
Declining costs for new wind and solar projects support the
growing renewables share of the generation mix across a
wide range of assumptions—
24
0
1
2
3
4
5
6
7
2010 2030 2050
Natural gas price at Henry Hub
2019 dollars per million British the
2019
history projections Low Oil
and Gas
Supply
Reference
High Oil
and Gas
Supply
Low Oil and Gas
Supply
High Oil and
Gas Supply

25. $0
$200
$400
$600
$800
$1,000
$1,200
$1,400
natural gas combined cycle wind solar photovoltaic
AEO2020 overnight installed cost by technology
2019 dollars per kilowatt
Reference case Low Renewables Cost case High Renewables Cost case
2019 2050 2019 2050 2019
• The High Renewables Cost and Low Renewables Cost cases assume different
rates of cost reduction for renewable technologies compared with the
Reference case; non-renewables assume the same rates
25

26. • New wind capacity additions continue at much lower levels after production tax
credits expire in the early 2020s, but the growth in solar capacity continues through
2050 for both the utility-scale and small-scale applications because the cost of solar
PV declines throughout the projection period.
• Natural gas-fired combined-cycle generation capacity is also added steadily
throughout the projection period to meet rising demand.
• Heat rate improvement technologies increase the efficiency of power plants.
• The remaining coal plants are more efficient and continue to operate throughout the
projection period.
• Low natural gas prices in the early years also contribute to the retirements of coal-
fired and nuclear plants because both coal and nuclear generators are less profitable
in these years.
—as a result of competitive natural gas prices and declining costs for
renewables
26

27. In the AEO2020 Reference case, combined-cycle and solar photovoltaic are the
most economically competitive generating technologies—
27
region with builds (2023–25)
region with no builds (2023–25)
Note: economically attractive builds
are shown at or above the diagonal
breakeven line for each technology.
levelized
avoided
cost
of
electricity
levelized cost of electricity
AEO2020 levelized cost of electricity and levelized avoided cost of
electricity by technology and region, 2025
2019 dollars per megawatthour
0
30
60
90
120
0 30 60 90120
natural gas
natural gas combined-
0
30
60
90
120
0 30 60 90 120
coal, 30% carbon
coal
0
30
60
90
120
0 30 60 90 120
nuclear
0
30
60
90
120
0 30 60 90 120
solar photovoltaic
0
30
60
90
120
0 30 60 90 120
onshore wind

28. • The levelized cost of electricity (LCOE) reflects the cost to build and operate a power
plant per unit of generation, annualized over a cost recovery period
• When compared with the levelized avoided cost of electricity (LACE), or expected
average revenue realized by that plant, we can estimate the economic competitiveness
for that generating technology
• The solid, colored circles on the figure indicate that projects tend to be built in regions
where revenue (LACE) exceeds costs (LCOE)
• In the AEO2020 Reference case, expected revenues from electric generation for both
natural gas-fired combined-cycle and solar photovoltaic with single axis tracking are
generally greater than or equal to projected costs across the most electricity market
regions in 2025
• Correspondingly, these two technologies show the greatest projected growth through
the middle of the 2030s
—when considering the overall cost to build and operate and
the value of the plant to the grid
28

29. • The value of wind approaches its cost in nearly half of the regions. These
regions see new wind capacity builds in the AEO2020 Reference case,
primarily in advance of the phase-out of the production tax credit (PTC),
through the early part of the next decade.
• LACE accounts for both the variation in daily and seasonal electricity demand
in the region where a new project is under consideration and the
characteristics of the existing generation fleet where the new capacity will be
added
• The prospective new generation resource is compared with the mix of new
and existing generation and capacity that it would displace
• For example, a wind resource that would primarily displace existing natural
gas-fired generation will usually have a different value than one that would
displace existing coal-fired generation.
Contd…
29

30. Onshore wind will become more competitive over time, while natural gas-fired
combined-cycle and solar photovoltaic maintain their current competitive
positions—
30
AEO2020 Reference case levelized cost of electricity (LCOE) and levelized
avoided cost of electricity (LACE) by technology and region, 2025 and 2040
2019 dollars per megawatthour
levelized
avoided
cost
of
electricity
levelized cost of electricity
2025 2040
0
20
40
60
80
0 20 40 60 80
natural gas combined-
cycle
economically
economically
attractive
0
20
40
60
80
0 20 40 60 80
onshore wind
0
20
40
60
80
0 20 40 60 80
solar photovoltaic

31. • For both solar photovoltaic (PV) and onshore wind, LCOE increases in the near term
with the phase-out and expiration of the investment tax credit (ITC) and PTC,
respectively
• However, LCOE eventually declines over time because technological improvements
tend to reduce LCOE through lower capital cost or improved performance (as
measured by heat rate for natural gas combined-cycle plants or capacity factor for
onshore wind or solar PV plants), partly offsetting the loss of the tax credits.
• Solar may show strong daily generation patterns within any given region
• LACE for onshore wind is generally lower than other technologies because most of
the generation at these plants occurs at night or during fall and spring seasons when
the demand for and the value of electricity is typically lower
• Solar PV plants produce most of their energy during the middle of the day when
higher demand increases the value of electricity, resulting in higher LACE.
—as LCOE declines through learning-induced cost reductions and LACE increases
with rising demand and natural gas prices
31

32. • Solar and wind lead the growth in renewables generation in
most regions across all cases in AEO2020
32
0
100
200
300
400
500
600
700
800
history
Reference
HC
LC
HOGS
LOGS
history
Reference
HC
LC
HOGS
LOGS
history
Reference
HC
LC
HOGS
LOGS
history
Reference
HC
LC
HOGS
LOGS
history
Reference
HC
LC
HOGS
LOGS
history
Reference
HC
LC
HOGS
LOGS
history
Reference
HC
LC
HOGS
LOGS
Total renewables generation (all sectors), 2018 and 2050
billion kilowatthours
Northeast PJM Southeast Mid-Continent ERCOT
CAISO West
Note: HC = High Renewables Cost, LC = Low Renewables Cost, HOGS = High Oil and Gas Supply, LOGS = Low Oil and Gas Supply, PV= photo
onshore wind offshore
wind
small-scale solar PV utility-scale

33. 33
0
10
20
30
40
0 50 100 150 200
diurnal
storage
Reference case
0
10
20
30
40
0 50 100 150 200
diurnal
storage
Reference case
0 50 100 150 200
Low Renewables Cost
case
0 50 100 150 200
Low Renewables Cost
case
0 50 100 150 200
Low Oil and Gas
Supply case
0 50 100 150 200
Low Oil and Gas
Supply case
• Growth in utility-scale battery storage in AEO2020 follows
growth in solar in most regions in high renewable penetration
scenarios—
AEO2020 regional diurnal storage and solar photovoltaic capacity, 2050
gigawatts
solar photovoltaic
onshore wind
AEO2020 regional diurnal storage and onshore wind capacity, 2050
gigawatts
CAISO
ERCOT
Mid-Continent
Northeast
PJM
Southeast
West

34. 0
200
400
600
800
1,000
1,200
1,400
2000 2050
AEO2020 coal production by region
million short tons
2019
history projections
total
West
Interior
Appalachia
Reference case
0
200
400
600
800
1,000
1,200
1,400
2015 2050
2019
projections
Low Oil and Gas Supply
case
0
200
400
600
800
1,000
1,200
1,400
2015 2050
2019
projections
High Oil and Gas Supply
case
• Coal production decreases through 2025 due to retiring coal-
fired electric generating capacity, but federal rule compliance
and higher natural gas prices lead to coal production leveling
off afterwards
34

35. 0
20
40
60
80
100
2010 2020 2030 2040 2050
Capacity factor for fossil-fired plants (AEO2020 Reference case)
percent
coal
new multi-shaft
combined-cycle (natural
gas)
new single-shaft and
existing combined-cycle
(natural gas)
oil and natural gas steam
combustion turbine
(natural gas)
2019
history projections
• Lower operating costs and higher efficiencies result in
advanced natural gas-fired combined-cycle capacity factors of
80% by 2030 in the AEO2020 Reference case—
35

36. • After 2035, capacity factors for both combined-cycle technologies decline gradually,
in part because large increases in intermittent generation through 2050 alter the
dispatch patterns and requirements for fossil fuel-fired generation.
• The utilization rate of coal plants has fallen significantly in recent years as declining
natural gas prices have led to a shift in economics between existing coal-fired and
natural gas-fired combined-cycle generators
• In 2019, the average capacity factor of the U.S. coal-fired fleet was 48% compared
with an average natural gas-fired combined-cycle capacity factor of 58%
• After 2025, the installed coal-fired capacity level is much lower because only the
most efficient plants remain online. As a result, the average capacity factor for the
fleet recovers quickly and stabilizes at about 65%.
—but then decline over time as natural gas prices increase
and renewable generation grows
36

37. Social Cost – Benefit Analysis of
Renewable Energy Technologies

38. • Introduction
• Cost Benefit Analysis (CBA)
• Method of Cost Benefit Analysis
• Benefit Cost(B/C) Ratio
• Renewable Energy Technology
Parameter
• CBA parameters for Renewable Energy
• Implementof CBA forwind Energy
• Conclusion

39. Introduction
⚫Concern over global warming has led policy makers to
accept the importance of reducing green house gas
emissions
⚫Renewable Energy system become quite favorable now a
day becauseof national and international policies
⚫Still renewable energy technology is in early stage of
implementation and unit cost of energy is higher than
conventional plant
⚫But government provide incentive and cost based tariff
tosupportrenewableenergy
⚫Cost Benefit Analysis give a idea about the acceptability
of any renewableenergy plant

40. Cost Benefit Analysis
⚫Cost-Benefit Analysis applied to energy is the appraisal of
all the costs and all the benefits of an energy project taking
account of presentand futurework
⚫Cost Benefit Analysis (CBA) is little bit difference than
Social Cost Benefit Analysis
⚫Cost Benefit Analysis taking account of both financial
benefitanalysis and social cost benefit Analysis
Cost Benefit
Analysis
Social Cost Benefit
Analysis
Financial Benefit
Analysis

41. Choice of Cost Benefit Analysis
Decision Making is aboutchoice
• For an Individual: It takes CBA for own benefit and future
prospective. i.e project for employee to make there future
bright.
• For a Company: Being Concerned with the profit earning
capacityand income flow, they takecash flow analysis.
• For the government: Decision making for the government is
always a tough work, as it account for profit and at the same
time working to provide social benefit. This is the reason
because of that government project fail to become financial
viable.

42. Method of Cost Benefit Analysis
 In financial term, there is mainly fourway
of evaluating cost-benefit:
1. Benefits/Cost Ratio
2. Net PresentValue (NPV)
3. Internal Rateof Return (IRR)

43. Benefits/Cost Ratio

46. Type of Benefit-cost ratio

47. Renewable Energy Parameters for C/BAnalysis
⚫The type of parameter for C/B analysis is depend upon the
type of renewable technology
⚫Here the list which affect the analysis of RET
1. Location of plant
2. Type of renewable energy
3. Technology status
4. Government involvement
5. Availability of technical staff
6. Economical consideration of society
7. Overall objective of installation
8. Climate condition
9. Risk of natural disaster

48. CBAparameters for Renewable Energy
⚫CBA parameter can be categories on the basis of cost
inflow and outflow
Cost Outflow Cost Inflow
1. Capital costof plant
2. Annual maintenance cost
3. Unwanted investment due to technology
failure
4. Extra investment due to change in
incentive policyof govt.
1. Benefit byselling energy
2. Social benefit bysupplying electricity
in rural area
3. Carboncredit
4. Commitment to ward green
development
5. High rateof return to support
renewableenergy (incentive from
govt)

49. Implementation of CBA for wind Energy
⚫Cost of the system:
1. Land leasecost
2. Turbine installationcost
3. Electrical network upgradation cost
4. Costof additional reserve requirement
5. Component life maintaining cost
6. Operating cost
⚫Benefitsof thesystem
1. Capacity benefit
2. Carbon credit benefit
3. Fuel saving benefit
4. Social empowerment benefit in remotearea
5. With properdesign, multi function land utilization

50. Conclusion
• Most of the renewable energy project are less
economical viable, because of high investment and
risk associated with the project
• But still most of the government interested to increase
the shareof renewableenergy.
• Overall Cost Benefit analysis of renewable energy
show that theyareacceptable.
• Main benefit of renewable energy is that it is clean
form of energy and also socially acceptable and help
government to make a dream true to provide
electricity tovillage.

51. Financial Feasibility Evaluation of
Renewable Energy Technologies

52. • The purpose of this study is to assess the sites designated by
an industrial Company for possible solar PV, thermal solar or
geothermal installation and to estimate the cost,
performance and site impacts of these three systems
• Most of the capital will be provided by private investors who
get a share of the profit and risks involved in the capital
investment. The rest of the investment is financed by bank
credit
• Financial feasibility of any project is based on the risk involve
• Therefore financial feasibility evaluation is important in term
of stake holder benefit/cost-benefit analysis/benefit related
to govt. agency
• So the different study approach to risk and different has
been explored here

53. 1. Analyse renewable energy (RE)
using LCOE modeling
Macro
level
Technology/Sector
level
1. Power Market Risk
2. Permits Risk
3. Social Acceptance Risk
4. Resource & Technology Risk
5. Grid/Transmission Risk
6. Counterparty Risk
7. Financial Sector Risk
8. Political Risk
9. Currency/Macroeconomic Risk
2. Define 9 risk categories from an
investment perspective
3. These 9 risk categories form part of the
cost of equity/debt for renewable energy
Objective: Reduce
RE LCOE
Best in Class
RE Investment
(Developed Country)
Cost of Equity/Debt
Risk #1 Risk #2 Risk #3
%
%
Pre de-risking
RE investment
(Developing Country)
Cost of Equity/Debt
4. Public instruments can reduce these risks
and thereby decrease cost of equity/debt
%
Pre De-Risking
(Developing Country)
Cost of Equity/Debt
%
De-risking
instrument
#2
Post de-risking
(developing country)
Cost of Equity/Debt
De-risking
instrument
#1
Current LCOE of
Renewable Energy
Target LCOE
Cap Ex/
Depreciation
Op Ex
Cost of Debt
Cost of Equity
US$
US$
Study’s approach to risk and renewable energy

54. Survey: 9 Risk Categories
Macro
level
Technology/Sector
level
1. Power Market Risk
2. Permits Risk
3. Social Acceptance Risk
4. Resource & Technology Risk
5. Grid/Transmission Risk
6. Counterparty Risk
7. Financial Sector Risk
8. Political Risk
9. Currency/Macroeconomic Risk

55. Survey: Risk/Derisking Concepts
The study uses a conceptual framework in order to quantify risks and the impacts of public de-
risking instruments. Investor risk is broken down into three conceptual components (barriers;
negative events; financial impact). De-risking instruments fall into two categories (barrier
removal; risk transfer)
Policy
derisking
instruments
act to reduce
barriers
Financial
derisking
instruments
act to transfer
risk (impact) to
another actor
Negative
events:
Uncertainty
and delays
due to poorly
administered
licensing
Financial
impact:
Transaction
costs; delayed
revenues;
under- or no
investment
Barrier removal
Streamlined
licensing process:
Harmonized
requirements,
reduced licensing
steps; priority
areas/zoning
Conceptual framework for risks Practical example: permits risk
Drivers of Risk Components of Risk
Existence of
barriers in
investment
environment
Result in
increased
probability
of negative
events
affecting wind
farm
Negative
events result in
financial
impact for
investors
Barriers:
Lack of clear
responsibility
of different
agencies for
RET energy
approvals
Drivers of Risk Components of Risk

56.  Survey: Questions and Assumptions
Q1 : How would you rate the probability that
the events underlying the particular risk
occur?
Q2: How would you rate the financial impact of
the events underlying the particular risk,
should the events occur?
Q3: How would you rate the effectiveness of the
identified de-risking instrument in mitigating
the particular risk?
1 2 3 4 5
Low Impact High Impact
1 2 3 4 5
Unlikely Very Likely
1 2 3 4 5
Low
Effectiveness
High
Effectiveness
1. Please answer all questions based on the
current status of the risks in the
country’s investment environment today
2. Assume you have the opportunity to
invest in a 10-100 MW on-shore wind
park
3. Assume a high quality c-Si PV panel
manufacturer with proven track record
(eliminating certain technology risks)
4. Assume an O&M insurance contract
(eliminating certain technology risks)
5. Assume that transmission lines with
free capacities are located relatively
close to the project site (within 10 km)
6. Assume a build-own-operate business
model and a construction sub-contract
with high penalties for contract breach
(eliminating certain technology risks)
7. Assume a project finance structuring
3 Key Questions for Each Risk General Assumptions

57. 1: Power Market Risk
Risk Definition: Risk arising from limitations and uncertainties in the power market,
and/or suboptimal regulations to address these limitations and promote renewable
energy markets
Barriers
Market outlook: Lack of or uncertainties
regarding governmental renewable energy
strategy and targets
Market access/price: Suboptimal energy
market liberalization; uncertainties
regarding competitive and price outlook;
limitations in PPA and/or PPA process
Market distortions: high fossil fuel
subsidies
Negative events
• Inability to secure a visible and viable outlook for
cash flow generation
Examples:
• Uncertainty on long term policy outlook
• Difficult to negotiate PPAs
• Uncompetitive with subsidised fossil fuels
Financial
impacts
Q1
Derisking Instrument #1: Public sector activities to create an enabled investment environment
• Establish transparent, long-term national wind energy strategy and targets: National-level resource inventory/mapping;
establish national energy office; review technology options; renewable energy targets
• Establish well-designed and harmonized energy market liberalization and FIT (or similar instrument): Unbundling of the
energy market (generation, transmission, distribution); establish well-designed and transparent procedures for FIT, PPA tendering (or
similar); well-designed, transparent policy on key clauses for standard PPA
• Reform of fossil fuel subsidies: Assessment of fuel subsidies, phase-out/down of subsidies, awareness campaigns, design of transfer
programs to affected groups
Q2
Q3
Key Stakeholder Group: Public sector (legislators, policymakers)

58. 2: Permits Risk
Risk Definition: Risk arising from the public sector’s inability to efficiently and transparently administer
renewable energy-related licensing and permits
Barriers
• Labor-intensive, complex processes and
long time-frames for obtaining licenses and
permits (generation, EIAs, land title) for
renewable energy projects
• High levels of corruption. No clear recourse
mechanisms
Negative events
• Project delays and operational uncertainties
due to administration of permits
Examples:
• Inability to advance permitting of project
• Uncertainty and delays due to poorly
administered licensing process
• Limited/inability to have recourse in case of
breach of contract or arbitrary decisions
Financial
impacts
Q1
Derisking Instrument #1: Public sector activities to create an enabled investment environment
• Establish a one-stop-shop for renewable energy permits; streamline processes for permits: Establish institutional
champion with clear accountability and appropriate expertise for renewable energy; harmonisation of requirements; reduction of
process steps; training of staff in renewable energy
• Contract enforcement and recourse machanisms: Enforce transparent practices, wind energy related corruption control and
fraud avoidance mechanisms; establish effective recourse mechanisms
Q2
Q3
Key Stakeholder Group: Public sector (administrators)

59. Key Stakeholder Group: End-users, general public
3: Social Acceptance Risk
Risk Definition: Risks arising from lack of awareness and resistance to wind energy in the general public
Barriers
• Lack of awareness of renewable energy in
the general public: including, for example,
consumers, end-users, local residents and
labor unions
Negative events
• Social and political resistance activities due to
special interest groups
Example:
• Protests or vandalism at project site
• Delays in development, construction or
operations of renewable energy plant
Financial
impacts
Q1
De-Risking Instrument #1: Public sector activities to create an enabled investment environment
• Awareness raising of key stakeholders: Working with the media, awareness campaigns and stakeholder dialogue with end
users, policymakers, and local residents
• Community involvement at project sites: Community consultations including piloting models such as in-kind services (energy
access, local employment; etc.) or equity stakes in renewable energy projects
Q2
Q3

60. 4: Resource & Technology Risk
Risk Definition: Risks arising from use of the renewable energy resource and technology (resource
assessment; construction and operational use; hardware purchase and manufacturing)
Barriers
• For resource assessment and supply: inaccuracies in early-
stage assessment of renewable energy resource
• For planning, construction, operations and maintenance: sub-
optimal plant design; lack of local firms and skills. limitations
in civil infrastructure (roads etc.)
• For the purchase and, if applicable, local manufacture of
hardware: purchaser's lack of information on quality,
reliability and cost of hardware; lack of local industrial
presence and experience with hardware
Negative events
• Operational disruptions or
underperformance due to
technology disruptions or
malfunctions
Examples:
• Breakdown of hardware
• Delays through prolonged repairs
Financial
impacts
Derisking Instrument #1: Public sector activities to create an enabled investment environment
• For resource assessment and supply: Project development facility: capacity building for resource assessment
• For planning, construction, operations and maintenance: Project development facility: feasibility studies; networking; training and
qualifications
• For the purchase and, if applicable, local manufacture of hardware: Research and development; technology standards; exchange
of market information (e.g., via trade fairs)
Q1 Q2
Q3
Key Stakeholder Group: Project developers, supply chain

61. Derisking Instrument #1: Public sector activities to create an enabled investment
environment
• Strengthen transmission company's operational performance, grid management and formulation of
grid code: Develop a grid code for new renewable energy technologies; sharing of international best
practice in grid management
• Policy support for national grid infrastructure development: Develop a long-term national
transmission/grid road-map to include intermittent renewable energy
5: Grid/Transmission Risk
Risk Definition: Risks arising from limitations in grid management and transmission infrastructure in the
particular country
Barriers
• Grid code and management: limited experience or
suboptimal operational track-record of grid operator with
intermittent sources (e.g., grid management and stability).
Lack of standards for the integration of intermittent,
renewable energy sources into the grid
• Transmission infrastructure: inadequate or antiquated grid
infrastructure, including lack of transmission lines from
the renewable energy source to load centres;
uncertainties for construction of new transmission
infrastructure
Negative events
• Problems in connecting the renewable
energy plant to the grid and transmitting
electricity
Examples:
• Delays in grid connection
• Higher cost due to excessive grid code
requirements
• Inability to feed-in electricity due to poor
grid management
Financial
impacts
Q1 Q2
Q3
Key Stakeholder Group: Utility (transmission company/grid operator)
Derisking Instrument #2: Take-or-Pay Clause in PPA
• Addresses grid/transmission risks ((black-out/brown-out) and grid management (curtailment))

62. 6: Counterparty Risk
Risk Definition: Risks arising from the utility's poor credit quality and an IPP's reliance on payments
Barriers
• Limitations in the utility's (electricity
purchaser) credit quality, corporate
governance, management and operational
track-record or outlook; unfavourable policies
regarding utility's cost-recovery arrangements
Negative events
• Inability to receive payments for wind energy
generated and sold to the grid
Examples:
• Non-payment of tariffs
• Utility's credit profile deteriorates resulting in
reduced or non-payment of tariffs
Financial
impacts
Q1 Q2
Derisking Instrument #2: Guarantee of tariff /PPA
• Depends on specific circumstances and division of risks in PPA. Can include, as necesssary: partial risk guarantees on PPA;
counterparty guarantees as part of political risk insurance (PRI)
Q3
Derisking Instrument #1: Strengthen utility's management/operational performance
• Establish international best practice in utility/distribution company's management, operations and corporate
governance; implement sustainable cost recovery policies
Key Stakeholder Group: Utility (electricity purchaser)

63. 7: Financial Sector Risk
Risk Definition: Risks arising from the lack of information and track record on financial aspects of wind
energy, and general scarcity of investor capital (debt and equity), in the particular country
Barriers
• Capital scarcity: Limited availability of local or international
capital (equity/and or debt) for green infrastructure due to, for
example: under-developed local financial sector; policy bias
against investors in green energy
• Limited experience with renewable energy: Lack of
information, assessment skills and track-record for
renewable energy projects amongst investor community; lack
of network effects (investors, investment opportunities) found
in established markets; lack of familiarity with project finance
structures
Negative events
• Failure or delay in launch of wind
project due to unfavorable or
insufficient debt and/or equity
financing
Examples:
• High costs in soliciting investors and
debt providers
• Longer and more extensive process
for closing on financing
Financial
impacts
Q1 Q2
Derisking Instrument #1: Debt and equity products
• Depends on specific financial circumstances. Can include as necessary: public loans; public loan guarantees; public equity
Derisking Instrument #1: Public sector activities to create an enabled investment environment
• Financial sector policy reforms: Assess trade-offs between financial stability regulation and renewable energy
objectives (e.g. liquidity treatment); promote financial sector policy favorable to long-term infrastructure, including
project finance
• Strengthen investors‘ familiarity with and capacity regarding renewable energy projects: Industry-finance
dialogues and conferences; workshops/training on project assessment and financial structuring
Q3
Key Stakeholder Group: Investors (equity and debt)

64. 8: Political Risk
Risk Definition: Risks arising from country-specific governance, social and legal characteristics
Barriers
• Uncertainty or impediments due to war,
terrorism, and/or civil disturbance
• Uncertainty due to high political instability;
poor governance; poor rule of law and
institutions
• Uncertainty or impediments due to
government policy (currency restrictions,
corporate taxes)
Negative events
• Interferences to the operations and finances of
the renewable energy plant due to socio-
political instability
Examples:
• Damage or delays to renewable energy plant
due to violence
• Expropriation of assets
• Inability to repatriate cash flows
Financial
impacts
Q1 Q2
Q3
Derisking Instrument #1: Political Risk Insurance for equity and debt holders (PRI)
• Provision of political risk insurance to equity holders covering (i) expropriation, (ii) political violence, (iii) currency restrictions and
(iv) breach of contract
Key Stakeholder Group: National Level

65. 9: Currency/Macroeconomic Risk
Risk Definition: Risks arising from the broader macroeconomic environment and market dynamics
Barriers
• Uncertainty due to volatile local currency;
unfavourable currency exchange rate
movements
• Uncertainty around inflation, interest rate
outlook due to an unstable macroeconomic
environment
Negative events
• Exposure of project operations and cash flows
to macroeconomic and market related changes
Examples:
• Inability to sell electricity to the grid
• Mismatching of currency for revenues and
expenses
• Unexpected rise in financing costs due to
higher interest rates
Financial
impacts
Q1 Q2
De-Risking Instrument: Partial-indexing of the PPA tariff
• Addresses currency risk (the foreign exchange rate exposure that IPPs may face due to hard-currency lending with a local-
currency denominated PPA)
Key Stakeholder Group: National Level
Q3

66. References
• Africa”, August 2011
2. IRENA working paper,“Renewable Energy Technologies:
Cost Analysis Series”, June 2012
3. Eleanor Denny B.A., M.B.S, “A Cost Benefit Analysis of
Wind Power”, thesis report, University college Doublin,
Ireland, 2007
4. Paul Samuelson,“Economics”, McGraw-Hill, 21stEdition
Implementing
1. Ea Energy Analyses,
Renewable
“Costs And Benefits Of
Energy Policy In South