Very cool little model, with already lots of good insights. I'm wondering... how you know what gearing you can have depending on the situation. Is it just experience or can you provide a source?
What about the assessment of the risk in a foreseable future of either termination or review of CfD contracts given current public debt issues and/or rise in electricity prices? Does the discrepancy with PPA required price takes this into account?
That's political risk, and it is in principle assessed by lenders (and should be assessed by developers). Banks are not keen these days on tariffs that are "out of the money" and thus more at risk of being renegotiated or reviewed.
What is assumed about the volume of cover provided by the various forms of CfD? I am guessing actual output, with no additional allowance for unused availability (as is suggested by the reply to David Toke). If that is the case, I feel that the CfD IRRs are too low - or at least they would be in a UK context given the rate at which renewables are being installed here.
Very good modelling, whose results I do not doubt. However the fact that over 1 GW of solar farms have got going in the UK indicates that there are expectations of rather higher returns in the electricity markets. This implies that the UK CfDs for solar pv are good value for the consumer if the free-wheelers think they can get a lot more off the markets!
Solar has two components - the smaller scale projects that "compete" against retail prices, and the utility ones that go onto the wholesale market. For that second part, the question for CfD auctions is what kind of budget is allocated, against what long term price assumption, and, increasingly, whether the projects take on the capture price risk (which is not the case in the UK, and needs to be urgently corrected)
maybe, but as far as I can see relatively larger solar farms also go for merchant PPAs. I didn't mean this to be a lead-in for one of my posts, but take the example of the 34 MW Voltalia project I mentioned in this post about non-CfD solar projects: https://davidtoke.substack.com/p/rise-of-the-britsh-solar-farm-that
Very cool little model, with already lots of good insights. I'm wondering... how you know what gearing you can have depending on the situation. Is it just experience or can you provide a source?
It's an estimate of what banks will accept given the risk, based on past experience and actual transactions.
What about the assessment of the risk in a foreseable future of either termination or review of CfD contracts given current public debt issues and/or rise in electricity prices? Does the discrepancy with PPA required price takes this into account?
That's political risk, and it is in principle assessed by lenders (and should be assessed by developers). Banks are not keen these days on tariffs that are "out of the money" and thus more at risk of being renegotiated or reviewed.
What is assumed about the volume of cover provided by the various forms of CfD? I am guessing actual output, with no additional allowance for unused availability (as is suggested by the reply to David Toke). If that is the case, I feel that the CfD IRRs are too low - or at least they would be in a UK context given the rate at which renewables are being installed here.
John Macadam
It is indeed actual output. The IRRs are indeed more valid for EUR projects than GBP, where interest rates and IRRs are slightly higher.
Could I have your email Jerome. mark.barrett@ucl.ac.uk
Very good modelling, whose results I do not doubt. However the fact that over 1 GW of solar farms have got going in the UK indicates that there are expectations of rather higher returns in the electricity markets. This implies that the UK CfDs for solar pv are good value for the consumer if the free-wheelers think they can get a lot more off the markets!
Solar has two components - the smaller scale projects that "compete" against retail prices, and the utility ones that go onto the wholesale market. For that second part, the question for CfD auctions is what kind of budget is allocated, against what long term price assumption, and, increasingly, whether the projects take on the capture price risk (which is not the case in the UK, and needs to be urgently corrected)
maybe, but as far as I can see relatively larger solar farms also go for merchant PPAs. I didn't mean this to be a lead-in for one of my posts, but take the example of the 34 MW Voltalia project I mentioned in this post about non-CfD solar projects: https://davidtoke.substack.com/p/rise-of-the-britsh-solar-farm-that