Renewable

Energy
Finance
MSc Sustainable Finance &
MSc International Management (CEMS)
 Module Overview, Content &
Structure

Agenda
Power System Overview
 Welcome &
Introductions –
Lecture Format
Lecturer &
Students

Module Class Participation Reading

Overview,
Content
& Course Outline Guest Speakers

Structure
Assessment
INTRODUCTIONS
 “To be able to hold your own with Renewable
Energy Finance Professionals in terms of having
an understand of the Language, Structures (legal
My Objective & Financial),Process, Risks, Key Commercial
Contracts and Agreements, in this industry. As
(for you) well as having an understand of how the sector
has evolved, the role of Policy in influencing the
direction and speed of deployment as well as the
threats and opportunities for the Industry.”
 Review Readings incl. Discussion & Q&A

Guest Speaker
Lecture
Format
Lecture

Review of Following Lecture

 Guest Speaker
Learning Inputs Insights

My Experience

Your Preparation
& Participation

Reading

Lecture
 Field Trip

Tuesday 16 th April
 Development Power
Overview
Cycle Markets
Module
Building
Funding Financial
Blocks PPA
Models Modelling

Commercial, Government &

Project
Contractual & The Private
Finance
Legal Sectors
 Lecture Actual Date Topic
1 22-Jan-24 Overview
2 29-Jan-24 Development Cycle
3 06-Feb-23 Power Markets
4 12-Feb-24 Sources of Finding
Course 5 19-Feb-24 Modelling I

Outline 6
7
26-Feb-24
04-Mar-24
Modelling II
Project Finance
11-Mar-24 Reading Week
25-Mar-24 Reading Week
8 25-Mar-24 PPA
9 02-Apr-24 Commercial Contractual & Legal
10 8-Apr-24 Role of Gvt & Priv Sector in Dev
11 15-Apr-24 Group Project
12 22-Apr-24 Cap Stone Lecture
 Assessment Format
Assessment Timetable

Assessment Start/Issue Finish/Submission

Date Date
Class Jan 22nd April 22nd
Participation
Individual Jan 31st (CEMS) Mar 5th
Essay Feb 7th (REEF)
CLASS PARTICIPATION INDIVIDUAL GROUP PROJECT
(20%) ESSAY(40%) (40%)
Group Project Mar 5th Apr 12th
 Attendance

Contribute to “Breaking News”.

Student Participate in Class Debates – Prescribed Topics

Participation

Active involvement in Lectures.

Engage with Guest Speakers.

Breaking News
 Breaking News
1. Purpose: Keep on top of Renewable Energy

2 Format: Each students Submit topic of their Choice

3. Deadline; 17:00 Friday

4. Short List of Three Shortlisted & One Selected (Start of

Lecture)

5. Frequency: Weekly.
 Topic : Energy (Sust Fin)
Sustainability (CEMS)

Format: Report:2,000 words. Times Roman 12, Spacing 1.5

PowerPoint \ Video Presentations (CEMS)

Individual Issue Date: 31st Jan (CEMS)

Essay 7th February (Sust Fin)

Return Date: 5th March (17:00) BOTH

Format : Electronic
 Topic: Format: Requirement:
Investment Presentation Investment
Appraisal to Investment Analysis &
Group Project Committee Recommendation

Timing: Required: Group Size 3

IM issued Mar 5nd, Power Point
Submit Apr 12th , Presentation & Report
Present Apr 15th (Electronic)
 Identification & Analysis of
issues/Challenges

Recommendations
Grading Matrix
Use and breadth of appropriate
literature referencing

Writing Style, structure & organisation

Housekeeping
• Running Order
• Class Start 14:00
• Personal Break 14:50
• Restart 15:00
• Finish 16:00 - (16:30 – Guest Speaker)
• Lecture Slides available after each Class (Brightspace)
• Reading Material (for the year) & Module Overview – Today
(Brightspace)
• Prepare for each class
• Read Prescribed Readings (as a minimum)
• Review Prescribed Questions
• Prepare Response For Class Participation (*)

(*) if you miss class, please send me an email (up to 350 words) of your opinions, feedback
and/or questions in relation to the material due for discussion in that class.
Why
Renewable
Energy?
Carbon
Budget
Why Renewable
Energy?
Sources of GHG
 Why does energy emit so
much GHG? Source
Hydrocarbons
%
81%
Renewables 2.2%
Other 16.8%

Source; Key World Energy Statistics 2021 - IEA

We Need to Change
Problem & Solution
Problem Areas
• Power (Electricity)
• Transport
• Heating & Cooling (C, I & R)
• Industrial Processes
Fuels
• Oil, Gas & Coal
Solution
• Green Electrons (Renewables)
• Power
• Heat
• Transport
• Industrial Processes
• Green Molecules (H & BioF)
• Hard to Abate Sectors
• Backup Generation/Storage
Renewables, efficiency and electrification dominate energy transition
Reducing emissions by 2050 through six technological avenues

90% of all decarbonisation in 2050 will involve renewable energy through direct supply
of low-cost power, efficiency, electrification, bioenergy with CCS and green hydrogen.
35
Electrification sits at the
Mega Trends in theheart of
decarbonising our environment, so lets
Power Sector
have a look at some of the Mega Trends in
the Electricity (Power ) Sector
Decarbonisation Decentralisation

4D’s

Digitisation Democratisation
Changing Structure of Electrical System
Evolution/Disruption Is Spawning New Business Models

Energy as a Service.
Micro Grids V.I.P.P Prosumer.
(EAAS)

Ancillary Services
Demand Side
Evolving PPA Market.(Balancing
Management. SMART GRID
Markets Markets, Frequency
(DSM)
Response etc..)
Thinking beyond the car. The Volkswagen Group is establishing important
prerequisites for the success of the brand’s electric offensive. “Our goal is to
ensure that an electric vehicle is capable of being a customer’s primary car –
without any compromises. That is why we are building a complete charging eco-
The Evolution of Transport & Energy
system, with residential charging solutions and a rapid expansion of the fast-
charging infrastructure required for mobile charging, as well as competent
Markets
advice, comprehensive charging tariffs and the right fleet solutions for business
customers,” says Elke Temme, Head of the Charging and Energy business area
at Volkswagen Group Components and CEO of Elli. “We also have a clear
strategic objective. We want to make it possible for the batteries in our electric
vehicles to be used on the energy market as flexible, mobile energy storage
units. Such energy storage options are essential for increasing the share of
renewable energies. In addition, this can also make charging significantly
cheaper for customers, and they will then be able to feed their own power into
the public grid.”
Why
Renewable
Energy?
Renewables
Family
This Photo by Unknown Author is licensed under CC BY-SA This Photo by Unknown Author is licensed under CC BY-SA
 1. DECARBONISATION

Drivers of
Growth 2. ELECTRIFICATION

in
3. ECONOMICS
Renewables
4 Security of Supply & Price Certainty
1. Decarbonisation
Net Zero (Govt & Corp)
 International Commitments
NET ZERO - TARGET DATE CLIMATE OBJECTIVE
NONE
58%
2070 2%

2060 4%

2050 66%

2045 2% 21%
18%
2040 2%

2030 22%
2%
2000 1%
NZ CN ERT NONE

COMMITTMENT - STATUS
29%
26%
24%

14%

4% 3%
Net Zero Tracker
NONE PROPOSED PLEDGED POLICY LAW ACHIEVED
 Top 2,000 Corporations (By Turnover)
NET ZERO COMMITTMENT
47%

37%

10%

2% 3%
0%

ACHIEVED ACHIEVED (S) CORP PLEDGED PROPOSED NONE

(E) STRATEGY
Corporate Policy – RE100

Google
24/7
2. Electrification
Electronification

Source: McKinsey
3. Economics
 Risk
Investment 1.0 V
Reward
Risk
 Change in
Risk
Preferences -
Hurdle rate
of return

Source: Oxford Institute for Energy Studies

(Positive) Features of Renewable Energy Sector

ASSET BACKED MATURING SECTOR GLOBAL LOW OR ZERO LONG TERM -

MARGINAL COST PREDICTABLE
REVENUE STREAM

STRONG GOVT SUPPORTED - INDEX LINKED

COUNTERPARTIES (POLICY AND OR (SOMETIMES)
FINANCIAL)
 1. Cost Competitive (LCOE)
Economics of • Falling Tech Costs
Renewables • Improved Efficiency
(V’s Hydro • Predictability & Reliability (Risk)
Carbons) • Falling Cost of Capital
• Lower Operating Costs
• Longer Useful Life
2. Price Certainty
Falling LCOE in Renewable Projects
4. Security of
Supply
Benefits of the (Renewable) Energy Revolution
Economic Energy security Energy Access
• $5tn (compared to • 80% world population in • 770m no access to
business as usual model) countries who import electricity – RE
(NPV to 2070 @ 4% disc) fossil fuels Cheapest– Sth Asia &
Africa

Pollution Climate Availability

• FF kills 8m pa • BAU >2.4c - Asymmetry • Abundant & eternal
to poorest countries

Development Geopolitics Unpaid Externalities

• - Opportunity to Leapfrog • Ability to influence • @€100/tn = $4tr pa
subsidy -

Gain not Pain; why COP must move the narrative forward – carbontracker.org
Opportunities for Renewable Energy to Contribute to SDG’s

Source; More than a Megawatt - Saleforce

Renewables
“Mega Trends”
The Stabalisers are Off!
 Challenges to the RE
Business &
Investment Model

• Increased Uncertainty/Risk; Development Risk,

Bid/Auction Risk, Grid Capacity, Curtailment etc..

• Increased Complexity; Balance Responsible,

Market Risk etc..

• Potential Cannibalization

• Reduced/No Subsidies

• Changing PPA Market

• Lower IRR
 st
1 Challenge– Reduce
LCOE
Falling LCOE in Renewable Projects
 Wrights Law Virtuous Cycle
Theodore Paul Wright, also known as T. P.
Wright, was a U.S. aeronautical engineer and
educator. While studying airplane
manufacturing, Wright determined that for
every doubling of airplane production the
labour requirement was reduced by 10-
15%. In 1936, he detailed his full findings
in the paper “Factors Affecting the Costs of
Airplanes.” Now known as “Wright’s Law”,
or experience curve effects, the paper
described that “we learn by doing” and
that the cost of each unit produced
decreases as a function of the cumulative
number of units produced.
Drives of Solar LCOE
• Cost Deflation
• Increased Warranty Period
• Increase Efficiency & Output
• Bifacial technology
• Tracking technology
• Agri Solar
 2nd Challenge– Improve
Performance & Availability
3rd Challenge - Evolve
the Business Model
Evolving Business Model
 • Drivers of Change include:
• I.O.T
• Big Data
Digitalization is • Advances in:
• Data Analytics
Revolutionising • Connectivity
the Wind (RE) • Machine Learning
• Predictive Data Simulations
Industry
• Digitization must be at the heart of the
new RE Paradigm
 4th Challenge

How to Improve the “Investability”

 Challenges to the RE Investment Model

• Increased Uncertainty/Risk; Development

Risk, Bid/Auction Risk, Grid Capacity,
Curtailment etc..

• Increased Complexity; Balance Responsible,

Market Risk etc..

• Potential Cannibalisation

• Reduced/No Subsidies

• Changing PPA Market

• Lower IRR
 Traditionally Today

• Pension Funds
RE Asset • Utilities
• Insurance
Ownership is • Private Developers Company’s
• Global Asset
Changing Managers
• Yield Co’s
• Sovereign Funds
• Private Equity
• Infrastructure
Funds
• Strategic Investors
• Corporates.
Drivers of
Growth
Growth
Recap
Decarbonization =
Renewable Energy
Lecture 2 – Development Cycle
Objectives
• A knowledge of the steps in the Development cycle for RE Assets.
• Ability to identify the key milestones in the development cycle
• An understanding of the drivers of value resource measurement

Reading
• Developing Renewable Energy Projects Larger Than 10 MWs at Federal
Facilities - FEMP (Section II & Appendix B & E)
• Establishing the investment case (Wind Power) – Deloitte (Section 5 –
Investment Case Certainty)

Questions
• What would you include in a PEST Analysis, before entering a new
electricity energy market?
• What are the key factors to consider in the Pre-Construction
Phase?
Breaking News
Thank You
Recent Developments bode well for Renewable Energy Projects

Big Tech procuring Further innovation in

renewable energy Financial Markets

Favourable Market Access to sources of

Conditions capital
 Anthropogenic perturbation of the global carbon cycle

Perturbation of the global carbon cycle caused by anthropogenic activities,

global annual average for the decade 2012–2021 (GtCO2/yr)

The budget imbalance is the difference between the estimated emissions and sinks.
Source: NOAA-ESRL; Friedlingstein et al 2022; Canadell et al 2021 (IPCC AR6 WG1 Chapter 5); Global Carbon Project 2022
 Global Fossil CO2 Emissions

Global fossil CO2 emissions: 37.1 ± 2 GtCO2 in 2021, 63% over 1990
Projection for 2022: 37.5 ± 2 GtCO2, 1.0% [0.1% to +1.9%] higher than 2021

Uncertainty is ±5% for

one standard deviation
(IPCC “likely” range)

When including cement carbonation, the 2021 and 2022 estimates amount to 36.3 ± 2 GtCO2 and 36.6 ± 2 GtCO2 respectively
The 2022 projection is based on preliminary data and modelling.
Source: Friedlingstein et al 2022; Global Carbon Project 2022
 Remaining carbon budget

The remaining carbon budget to limit global warming to 1.5°C , 1.7°C and 2°C is
380 GtCO2, 730 GtCO2, and 1230 GtCO2 respectively, equivalent to 9, 18 and 30 years from 2023.
2610 GtCO2 have been emitted since 1750

The remaining carbon budgets are updated from IPCC AR6 WG1 Chapter 5 by removing additional historical emissions since 1 January 2020.
Quantities are subject to additional uncertainties e.g., future mitigation choices of non-CO2 emissions
Source: IPCC AR6 WG1; Friedlingstein et al 2022; Global Carbon Budget 2022
Key energy system components to
achieve the 1.5°C scenario
Energy (Green)
Renewables Electrification
Efficiency Hydrogen

Bio Fuels CCS

 Fossil CO2 Emissions by source
Share of global fossil CO2 emissions in 2021: coal (40%), oil (32%), gas (21%), cement (5%), flaring and others (2%, not shown)
Projection by fuel type is based on monthly data (GCP analysis)

Source: Friedlingstein et al 2022; Global Carbon Project 2022

Renewable
VALUE KEY MEGA
Energy DRIVERS INSIGHTS TRENDS

Market
Overview
OPPORTUNITY IMPROVE SUMMARY
& Threats INVESTABILITY
IRENA’s analysis
shows that over 90%
of the solutions
shaping a successful
outcome in 2050
involve renewable
energy through direct
supply, electrification,
energy efficiency,
green hydrogen and
bioenergy combined
with carbon capture
and storage (BECCS).

WORLD ENERGY TRANSITIONS OUTLOOK 1.5⁰C pathway - IRENA