MITIGATING TECHNICAL RISKS FOR DEVELOPERS AND FINANCING INSTITUTIONS EVAN RILEY, RENEWABLE ENERGY CONSULTANT

Transcription

1 8 Dec cember MITIGATING TECHNICAL RISKS FOR DEVELOPERS AND FINANCING INSTITUTIONS EVAN RILEY, RENEWABLE ENERGY CONSULTANT

2 8 December 2013 First bond dissuance backed dby revenue from a solar farm MEHC s 550 MW Plant: A Black & Veatch IE engagement BLACK & VEATCH 10,000 person international engineering firm based in Overland Park, KS, founded in 1915 Majority of work in energy sector Significant expertise in solar power: Technical due diligence, contract review, construction monitoring, policy, integrated resource planning, detailed ddesign Independent Engineer for ~45 MWp project in Japan Development support for over 150 MW in Japan Owner s Engineer for ~60 MWp project in Thailand Involvement in over 4,000 MW of utilityscaleand and distributed generation PV projects world wide EPC for ~50 MWp project in Arizona 2

3 Table of Contents What are Technical Risks? What Risk, Whose Risk? Commercial Agreements Permitting Major Equipment Bankability System Design Performance Financial Model / Economic Risks 3

4 8 December 2013 TECHNICAL RISKS VS. NON TECHNICAL RISKS Technical Risks Design Major Equipment Resource Performance Commercial Agreements (Technical) Permitting Non Technical Risks Taxes Financing Insurance Policy 4

5 WHAT RISK? WHOSE RISK? Properly crafted commercial agreements parse the appropriate risk to the appropriate stakeholder Who holds odsmodule risk? s? Who holds BOS risk? Who holds permitting risk? Resource risk belongs with the Owner Can each stakeholder make good for their obligations? 8 December 2013 Developer EPC Lender Owner Energy Off taker 5

6 WHAT RISK? WHOSE RISK? 8 December 2013 Developer Developer/Owner Develop EPC Own Develop Procure Lender Owner Constructor Lender Energy Off taker Energy Off taker 6

7 8 December 2013 COMMERCIAL RISKS Power Purchase Agreement Terms & Termination Pricing and Production / Liquidated Damages Curtailment Engineering, Procurement, & Construction Agreement Specification Guarantees & Warranties Operations & Maintenance Agreement Term & Termination (5 years vs. 25 years) Owner and Operator Responsibilities Guarantees & Warranties / Liquidated Damages Spare Parts and Major Equipment Strategies Do the agreements put risk in the right places? Alamosa Solar PV Power Plant 8.2MW Alamosa, CO Are the agreements consistent and comprehensive? 7

8 8 December 2013 PERMITTING AND ENVIRONMENTAL COMPLIANCE Pre construction requirements Post construction requirements Operating requirements What is required for continual compliance? Is my project in compliance? 8

9 8 December 2013 MAJOR EQUIPMENT BANKABILITY What does bankability mean? Manufacturing & quality Company strength/longevity (warranty) Reinsurance Parent guarantee Design Reliability & durability Installation, O&M Operating performance Degradation Equipment from bankrupt manufacturers Will the equipment operate as expected and is the warranty meaningful? 9

10 SYSTEM DESIGN 8 December 2013 Code compliance Agreement with specification System integration SCADA systems Long term reliability/operability QA/QC procedures Source: Emerson Ovation Is the design properly reflected in the production model? 10

11 8 December 2013 SYSTEM PERFORMANCE Solar resource NEDO? Satellite? Other? Conversion efficiency Availability Outages Degradation EPC Specification Production Model Financial Model Performance Test Can the system perform as expected? 11

12 8 December 2013 EXPECTED FUTURE ENERGY GENERATION Sources of uncertainty and typical values Radiation measurement uncertainty 5 15% σ b Radiation inter annual variability 2 6% σ Y Production model 3.5% σ M Likelihood of exceeding P50 50% Typical standard deviation ~ 6-7% P90 10-year P90 90% 90% This calculation is done in different ways! Some just look at inter annual variability. All risks should ldbe considered! d! Different resource/energy production estimates enable / gyp financial modeling and sensitivity analysis.

13 ECONOMIC RISK Proforma Confirm Assumptions, Monetize Risks Capital expenditures EPC costs Change orders Limits of liability Revenue Post term pricing Generation Performance ceof asset (P50, P90) Curtailment Availability O&M costs Expected vs. actual Contingency Are the project risks monetized appropriately? 8 December

14 Evan Riley, Renewable Energy Consultant PV Specialist Please questions to