New NREL Report: Impact of Financial Structure on the Cost of Solar Energy

A new report from the finance team models the effects of tax equity partnership structures on the levelized cost of energy (LCOE) from utility-scale concentrated solar power and PV facilities. The analysis covers three tax equity structures in particular—all-equity partnership flips, leveraged partnership flips, and sale leasebacks—as well as a single-owner structure that uses internal tax appetite. To determine each one’s influence on LCOE, the authors employed the System Advisor Model (SAM), a performance and financial modeling software developed by NREL in conjunction with Sandia National Laboratories, which is available for public use. A few highlights from the analysis are as follows:

All-equity financial structures yield higher LCOEs than those that incorporate project-level debt (which is less expensive than tax equity). In practice, however, the process of securing debt has transaction costs that are unaccounted for in SAM.

Extending the tax equity partner’s payback period can improve LCOE (e.g., a delay from year eight of the project to year nine can reduce LCOE by 7%-27%)

The analysis indicates that projects utilizing PV technology generally have lower LCOEs than projects utilizing CSP (trough and tower) technologies. However, a portion of CSP’s higher costs derive from its perceived technology risk and therefore heightened financing costs. CSP project demonstration and development experience could improve LCOE by lowering debt and equity yields.

via New NREL Report: Impact of Financial Structure on the Cost of Solar Energy | Renewable Energy Project Finance.

Categories: Electricity, Energy, Finance