Renewable entry costs, project finance and the role of revenue quality in Australia's National Electricity Market

Contract design for storage in hybrid electricity markets

“…Debt and equity sizing constraints are assumed to apply quarterly and contract payments are settled at the same periodicity. Our financial assumptions are consistent withGohdes, Simshauser and Wilson (2022) and updated based on most recent market data .…”

“…The model takes as inputs the results for the Storage unit commitment model combined with storage technical assumptions and capital markets input data to produce a comprehensive set of financial structures, credit metrics, buy-side counterparty exposures and minimum contract price. Given the role of credit quality as a fundamental driver of investment in energy-only markets, both across independent (Gohdes, Simshauser and Wilson, 2022) and vertically integrated operations, (Simshauser, 2021) it is important that the model mimics practical tranched capital structures and corresponding finance-ability metrics in a manner that reflects observed behaviours vis-à-vis capital structures. The model develops a cashflow waterfall based on metrics that are consistent with generally accepted financial conventions used by project finance banks.…”

Marginal Curtailment of Wind and Solar Pv: Transmission Constraints, Pricing and Access Regimes for Efficient Investment

“…In modelling European curtailment problems, consider a local REZ defined by export constraints in a region potentially attractive to VRE, and suppose that there are no other flexible generation or demand resources within the REZ nor any internal network constraints. Suppose hypothetically (and already a reality in countries like Australia, see Gohdes and Wilson, 2022) that VRE investment is commercially viable without a long-term contract, so that we can consider subsidyfree merchant entry. Suppose also that the export constraint, , has been pre-determined and cannot be relaxed in a reasonable time frame.…”

The role of policies in reducing the cost of capital for offshore wind

“…According to recent survey data (from Australia, but still relevant for this discussion), renewable energy projects with greater exposure to corporate off-takers and merchant risks tend to have higher credit spreads and lower debt shares than CfDs. 49 Moreover, banks typically mandate loan repayment periods equaling the duration of PPAs. 11 Recent corporate PPAs with offshore wind farms usually have a duration of 10–15 years (for example see references 79 , 80 , 81 ), shorter than government-backed remuneration schemes that typically last 15 to 20 years.…”

“…Both one-sided and two-sided CfDs can stabilize revenues, with two-sided CfDs being more favorable for debt financing, as argued previously, by industry and academia. 12 , 16 , 36 , 44 , 46 , 49 , 59 The optimal CfD designs regarding hedging, the production volume, the reference period duration, etc., are the subject of discussion. 59 , 60 However, the current debate lacks input on how revenue stabilization impacts offshore wind transactions and how this ultimately leads to lower CoC.…”