Renewable Energy Literature Survey Dissertation

Renewable Energy Literature Survey - Dissertation Example It demonstrated how capital can be obtained for project financing through a combination of debt and equity investment, debt being available through bank loans, institutional debt or through public markets. The paper mentioned the possibility of procuring equity from internal or external sources in public and private markets, and sponsorship through developers, contractors, equipment suppliers, operators, off-takers and fuel suppliers, who are active equity investors. The factors limiting project finance of renewable energy power projects (REPP’s) were examined. The author indicated that resource and technology risks were high and that financial institutions lacked the experience in evaluating risks related to REPP’s. The author also noted that with the rapid change in technology and the shortage of REPP technology engineers, they would have lacked the technical expertise in this area to assess and monitor REPP’s. ... This therefore results in a smaller margin for project financing and consequently puts pressure on costs related to maintenance and overheads. The author also pointed out that government policies, which are often unpredictable, greatly affect the economies of REPP’s. The paper gave focus to the importance of equity, seeing it as the main protection against risks. Lenders will therefore favour equity contributions in the initial part of the project. Lenders see equity investment as a form of commitment by the developers and sponsors. The author also found that security was another significant consideration for the lender, so they would implement safeguards such as a fixed charge over the projects site; a floating charge over the assets of the projects company; requiring that all cash flow be paid into a project account where they would have control, and contingency funds in place for unforeseen problems. The experience and credit worthiness of all participants would also be con sidered by the lender. There financial strengths would be assessed and the ability of these parties to carry out their contractual obligations with the project company would be determined. The article highlighted a number of risks that should be considered. The risk areas include the project itself, technology, construction, fuel/resource, the market, regulatory risks, mitigation and pass through. Project risks affect the amount, timing and availability of funds for the project finance. For technology lenders want to ensure that it is tested and proven, and that it will not be obsolete anytime soon. In relation to the construction risks the paper looked at the probability of cost overruns and delays in completion; most importantly